Why Invest in Real Estate – Able to add value

Tuesday 18th January 2011 4:40pm

The purpose of this article is to explore the ability to add value to your real estate investments.

Very little effort will often bring about substantial gains when adding value to your real estate investment.

Something as simple as clearing up the garden, a coat of paint, modern bench top in the kitchen or building a car port can easily add value to a property with the goal to either increase its rental yield or its selling power on the market.

Many real estate investors enjoy how tangible their investment is, and the control they may have over increasing its capital growth potential by making small value adding changes to its look, feel or functionality.

Investors who are able to add value to their property may also do so while enjoying the benefits of tax deduction. If expenditures on your rental property's other income -- reducing the amount of money on which they pay tax.

Value-adding can also increase the property's cash flow potential - for every $10 extra rental income you get you can usually add an extra $5,200 to the valuation of your property - $10 per week for 52 weeks per year is $520 a year -- for the property investor every little bit counts.

Deciding how to add value to the property is the biggest hurdle and you do not want to over-capitalize on the investment or its capital growth potential.

A simple rule to follow when value adding to your real estate investment is to keep it simple.

If the bathroom is old and run down and potential tenants are deterred by its state it's probably worthwhile investing in a bathroom renovation. This can be done simply; maybe all you need to do it replace the tiling, add a modernized sink or toilet or replace the shower curtain for a glass door.

Every little bit counts when it comes to adding value to your real estate investment -- and it's usually little changes which come at low costs that are most worth your while.

If you have added value to your investment property through renovations and you wish to borrow more money to continue with your real estate portfolio it may be worthwhile having an independent valuer carry out an assessment of the improved property. The more equity you have as capital leverage when re-borrowing the better.

My Knowledge Tips

1. Very little effort will often bring about substantial gains when adding value to your real estate investment.
2. Investors who are able to add value to their property may also do so while enjoying the benefits of tax deduction
3. A simple rule to follow when value adding to your real estate investment is to keep it simple
4. If you have added value to your investment property through renovations it may be worthwhile having an independent valuer carry out an assessment of the improved property