The Dynamic Duo : Renovate and Develop

When Mark Dugmore first saw his latest investment property, a two-bedroom Queenslander, he knew - as did the agent - that it was a prime candidate for a renovation. What Mark also saw - and the agent didn’t - was that the block also had a valuable hidden asset.
 
“The place was pretty run down,” says Mark, “but it had a solid structure that didn’t require too many structural repairs.  It had an enclosed front verandah, a water damaged bathroom and decor that hadn’t been updated in half a century. It looked like a dump inside.” But Mark saw that there were plenty of positive aspects too:
 
1) Location  - “The house was on a corner block on a quiet street close to the city. Shops cinemas, transport, schools, restaurants, cafes, and the airport were all nearby.”
 
2) Room for Renovation – “We could see through the ageing decor and visualise that it would look cute (and be nicely valued) after a reno that we could mostly do ourselves. We also realised that a third bedroom (and an extra $7,500 pa rent) could be added for little cost.”
 
3) Price – “In addition, the price was right.  The median price for the suburb was ~$698K and we knew that getting a house with development potential for $514K was a steal."  The cheapest run-down sites without issues tend to sell in the high $500k’s in the suburb, so they knew they were onto a winner.

But Mark had also spotted something else: “It had a great twist! It was a development site. The property was listed with an agent from across town, a friend of the vendor.  He didn't realise the potential for development of the property and so consequently, their listing price reflected a straight renovator and not a development block.” Mark knew that he could quickly add value to the existing house with a cosmetic makeover, but that the real money would come from development.

     
Bathroom Before

 
Bathroom After

“The block is large enough to build at least one and maybe two more separate freehold dwellings on the side. Just down the street, someone else has employed exactly the same strategy where they are building a new dwelling out the back.  Ours is on a corner block and will have a higher valuation for the end product because of the corner lot location.” Mark has renovated the existing house and is planning the development of two new dwellings on the site. He expects to make a 25-30% return on his investment.
 

Hidden Value
Mark’s success is down to his ability to spot a property’s hidden potential, but it’s not unusual for people - even professionals such as architects and town planners - to be blind to the potentially lucrative opportunities. The best way to learn how to spot a great investment is by viewing a lot of properties and learning through your mistakes; but experience that takes years to acquire and the lessons can be costly. 
 
A Real Eye Opener
Fortunately, there is a faster and more fun way to learn: On the Buses! Reno Kings, Geoff Doidge and Paul Eslick, have more than 50 years combined experience of researching, investing, buying, renovating, developing and renting property. On Sunday 27^th June 2010, they will share their knowledge on a unique bus tour around Brisbane that takes in 25 of their best and worst property investments. The route also goes past Mark’s newly renovated house so you can compare it with similar properties in the area. “Pick a similar house with an old chain wire fence and enclosed verandah,” advises Mark,  “and see how a new fence, fresh paint can add value to a house’s street appeal.” 
 
See Mark’s house by joining Reno Kings On the Buses! workshop on 27^th June, 2010.

For the full story on how Mark expects to make a 25-30% return on his investment click here.