PROPERTY INVESTMENT

The Hidden Opportunities of investing in your backyard

June 29 2016
House behind house

Why a house behind house development could be your next investment opportunity.

Over the past few years more and more people have been choosing to build in their own backyard. Whether your end goal is to build to sell, or to rent out the property; a rear strata development could be a great way for you to start your property portfolio.

The Options

Build to sell

Rear strata investors may look at the opportunity to build and sell to make an immediate return on the project. This usually involves the investors building a brand new home at the rear of the property and on-selling this once built.

Matching the correct house for the block, and the area are essential in getting maximum returns on the project. I can’t stress enough that if you are intending to build to sell, ensure that you have done sufficient market research on the area, understand what the market will be like once the new home is constructed and have a sound marketing and backup plan.

Build to rent

If the end goal is to rent out the property, and the intention is to keep the house for 5 – 10 years, then history shows that the investment will increase in value, while you receive the tax advantages of having an investment property.

Generally the longer you hold the property, the more the investment goes up, and the risk is minimised. Longer term investments also buffer against falls in the market price.

All markets around the World have booms and busts in property and shares. The benefit with a property is that if it makes financial sense to hold the property long term, and the rental returns are satisfactory, then a fall in the market price should have little effect on the investment unless you have to sell.

When considering building to rent, investors may also consider moving into the new rear house and renting out the front existing home. With this model you are getting all the benefits of a demolish and build with the added benefits of a rental investment.

Rear Strata development

So why develop in your own backyard?

Location

With the price of land increasing every year in Perth, the ideals of purchasing the quarter acre block close to the CBD are outside most peoples reach. Many suburbs located within 12km radius of the CBD have blocks that are large enough, and have the required zoning to build two houses on one block. Many of these prime locations are referred to as “blue chip areas”, and the trend of subdividing the back yard is growing, as is the demand to live in these well located areas.

Large block owners cashing in

The cost of maintaining a large backyard is not affordable for many people. Maintenance of a pool or a garden has increased a lot over the past few years, and if the family has grown up and moved on, it makes sense to split the block in two to reduce the overheads and to create a cash injection for the owner.

Security

Living behind another house has security advantages, as not a lot of the house is visible from the street. If somebody wanted to break into the property, they would have to pass the front house to gain access, which increases the risk of the burglar getting noticed and caught. Additional security, such as gates can be constructed on the access drive which has become popular with many young families. This allows children to use the driveway safely as an additional playground for skateboards or bikes.

Getting Started

Now we have established time is your friend, and with time you minimise the risk with market fluctuations, it is imperative that you plan the investment and know what outcomes you are striving to achieve.

There are several online sites that will give you examples of other properties that are selling or renting in the same area, and you can also talk to your Builder who will be able to give you a sound idea of the building and associated developing costs.

If you would like to learn more about House behind House developments, try speaking to the WA Property Development Experts at Ventura iD to receive an obligation free consultation.

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