house property worth

when investing in property, one of the bestways to move from one property to the next property is to invest using the equity fromthe first property that you purchased. and you can either wait for the market togo up in value and for your property to go up in value or you can add that value yourselfand that's what we're going to be talking about today. today, i have with me none other than beneveringham, the buyer's agent. ryan: hey, ben. how's it going? ben: thanks, ryan, for the intro.

ryan: today, we're going to be talking abouthow to add $50,000 to your next investment property. so we're going to be looking at some differentways that you can purchase an investment property and quickly add some equity to it so thatyou can move on and invest again or you can just lower your loan-to-value ratio or whateverit is that you want to do. hey, ben, well, i guess, let's just talk about;apart from the fact that people may want equity to go again, are there any other benefitsto instantly adding this sort of equity to a property? ben: i think the number one thing for me andthe reason why i've sort of created this strategy

for our clients is from a risk perspective. i feel, like we've talked about this personally,but i feel less and less comfortable with debt these days. and i feel less comfortable with propertyinvestors in general being in debt. and that's probably based on having a hundredconversations with investors from all over australia a month. and some of those people telling me abouttheir financial situation. i'm not a bank and i'm not a mortgage broker,but i look at some of these people and i kind of scratch my head and go, "what happens wheninterest rates get to 7% or 8% or what happens

when banks start recalling money and startlooking at all those people that are at 95% or 90% and the market's dropped by 20%?" you're kind of in that situation where you'rea bit stuck. i'm just trying to create, using this equity-basedapproach, a bit of a bridge between your loan-to-value ratio. ryan: so it's kind of a way of hedging yourbets, i guess, against the future. obviously, being super leveraged can be greatto grow your portfolio quite quickly, but it does bring with it risk if interest ratesrise. then, obviously, you're more exposed, you'regoing to feel the effects of that more than

someone who would have less debt. and also, if something bad happens and thebanks decide to start recalling loans, chances are, they're going to probably go after thepeople that have high loan-to-value ratios first and recall their loans because they'rethe riskiest ones. so it's kind of like taking yourself out ofthe firing line of something that may happen in the future. have i got it right? ben: yeah, correct. i don't mean to start this video as a doomsday because i feel like, and we've talked

about this, that the market is going to beextremely strong for at least the next 7-8 years in australia. but where i'm coming from, i just, you know,getting a little bit older and getting a bit more sophisticated as an investor. ryan: you're so old, man. ben: i always say this. i've got to stop it. ryan: but that's the thing. the thing is, right, i'm 28.

you're 30. most people who are investing are older thanus and later in their lives and they don't want to be highly leveraged and have hugeamounts of risk. some you people are happy to do that becauseif they lose everything, they can bounce back. they've got the years to do it. but not everyone has that. so it makes sense that people would want toavoid risk. and so, really, adding $50,000 of equity canwork for both the risky investor who just wants to grow quickly as well as the risk-adverseinvestor who wants that $50,000 buffer so

if the market goes down or if they have tosell the property or any situations happen, they know they've added $50,000 of value thatthey can sell out at any point and they're not going to lose any money. so it makes a great deal of sense. let's get into it. let's talk about some of the ways that peoplecan add equity to their next investment property. and we were talking before the show aboutthe first strategy, which i think is a great one if we can find the right property. so i'll let you tell us about it.

ben: beautiful. so i think the lowest hanging piece of fruit- because you're always looking for the highest return of your investment for the least amountof work, least amount of risk and least amount of money out of your own pocket. what i've identified from buying a fair bitof property this year is that in some of the more premium suburbs - the suburbs where theaverage price is sort of between $400,000 and $550,000 for example. in brisbane, just as a market - ryan: okay, i was going to say, what kindof area are we talking about?

because in sydney, that's like the bottomof the barrel. like, you probably can't even get anythingfor that. ben: in sydney, i'm talking about orange,at the back of the blue mountains there. ryan: 4 hours drive out of sydney. a little commute each day. ben: yeah. have you heard of hobart? [inaudible 4:51] out of sydney now, is it? ryan: yeah.

ben: basically, i'm talking about - i'll usebrisbane as an example today because i've been spotting these opportunities in thatmarket and it's basically where you find and existing 3 bedroom, 1 bathroom home, for example,with a huge internal floor plan. like a floor plan basically like i describeit is, a floor plan that's too big for a 3 bedroom, 1 bathroom house. for whatever reason, the person at the timeof constructing it just built something that was probably overcapitalized at that time. but now, you can look at changing that internalfloor plan and maybe turning the 3 bed, 1 bath into that 4 bedroom, 2 bathroom home.

the way to identify that gap in the marketis when the 3-bedroom home, for example, is selling for $400,000 and the 4-bedroom homeis selling for $460,000 on average. so somewhere where the gap is significant,like a $60,000 or $70,000 gap. which, again, those properties close to thecbd definitely have that bigger gap at the moment. ryan: just to clarify for everyone who's listening. we're talking about converting a house thathas 3 bedrooms and 1 bath into a house that has 4 bedrooms and 2 bathrooms, but withoutactually adding any extensions on to the property. so you're doing it under the existing roofand your'e just moving walls around and stuff

like that. is the second bathroom going to be an en suite? ideally it would be an en suite, yup. ryan: okay. so we're looking to try and find those propertiesbecause, obviously, if you don't have to add to the extension of the property, you don'thave to extend the roof and all of that sort of stuff. there's obviously a lot less council hoopsthat you're going to have to jump through. it's going to be a lot less expensive becauseyou're not building another roof.

you're not building more walls. you're just building some internal walls andkeeping to the structure of the existing property. the first thing that ben was saying is youneed to find the area where there is that difference between 3-bedroom and 4-bedroomhouses. so you want the 3 bedrooms to be a decentamount cheaper than the 4 bedrooms so you know, "okay, i'm going to buy a 3-bedroom. i'm going to spend x amount to turn it intoa 4-bedroom, 2-bath. i need to know that there's still profit atthe end of that if i want to go ahead and sell that property."

so what are some techniques that people canuse to kind of find out where these suburbs are? is it really just going on to realestate.com.au,looking at the suburb and comparing 3 to 4-bedroom houses? i think once you've identified the suburbor handful of suburbs that you're going to target, it's then, as you said, probably theeasiest way, if you don't have access to sales history data, would be to jump on realestate.com.auand begin looking at the average gap between a similar level of quality of 3-bedroom, 1-bathroomto 4-bedroom, 2-bathroom homes. let's say you're targeting a 3-bedroom brickhome with a tiled roof on a slab, then you

want to go find a 4-bedroom brick home tiledon a slab that you can compare it against in terms of the same sort of quality of finishesand fixtures and renovation as well. ryan: yeah, so it's really, there is someleg work involved in this. but what we're looking for is that propertiesthat are going to give us the maximum return with the least amount of risk. that's not going to be any property out there. it's something that you're going have to spendsome time searching for. so it's not going to be easy to find these,but they definitely are out there. let's say that we do find these suburbs.

and i'm sure that there's a tool out there- i can't think of it off the top of my head where you can see the median house pricesfor 3 beds, 4 beds, 2 beds in a suburb. so you could always do that to try and narrowdown your suburbs for further searching. ben: sorry to interrupt, but when you jumpon realestate.com.au now, like realestate.com.au's data analytics is so strong now. they've really incorporated rp data's informationinto the panes. so you can jump on a property, then clickinto the suburb analytics and it will have the difference between the 3 and 4 bedders. and when you see the average difference at$50,000, $60,000, $70,000, that's the easiest

way you can possibly identify it without lookingthrough hundreds of listings in each suburb. ryan: okay, cool. so let's say we find the suburb. how do we find these houses that have larger-than-averagefloor plans? ben: basically, unfortunately, it's a numbersgame and you've got to begin inspecting these properties. the cool thing about brisbane is a lot ofthe real estate agents actually provide a floor plan on realestate.com.au or domain.com.au. so you can jump on the floor plan and havea bit of a look before you even get to the

property and waste your time inspecting. what you're really looking for is, or whati look for when i'm out there doing it, i'm looking for either an undercover outdoor areaat the back of the property where the existing roofline of the property actually covers anentire al fresco or outdoor entertaining area. that means that they've put the slab downand the slab's gone out that whole undercover area actually has the same slab as the house. and the roofline is legal height and underthe existing roof so it's not a dodgy little piece of tin or something like that. ryan: so it's not like one of those woodendecks that people build with the see-through

plastic roofs or something like that. you're looking for one where they've builtthe whole house and the whole roof out, but a portion of that is actually an outside alfresco area. ben: exactly. ryan: and so, i'm guessing that the idea isthen to put walls up around that and to turn that into part of the internal house, is thatright? ben: that would be one really easy way todo it. and then, from there, if you ever want toextend out, you can put one of those, you know, dodgy little al fresco areas.

ryan: wooden decks with the plastic roof. you can put one of those on to keep the outsideal fresco area. can i ask you about that? with, i guess, all of these ideas, is theresomething that you need council approval for to put those walls up and stuff like that? and if we're, let's say it's not the outsidearea, but we're just moving around internal walls, are we going to need council approvalfor that as well? ben: in terms of the internal walls, you cando whatever you wish with the internal walls. as long as they're legal height, council won'thave a problem with it.

but when you start talking about convertingwhat was an al fresco on the original plan that was certified by council, you just wantto touch base with the town planner and make sure you get that certification before youstart the work. because, let's say you don't get it, a realestate agent, if it's not certified, legally, can't advertise it as a 4-bed, 2-bath anda valuer legally can't take that into consideration when they do the re-valuation so you loseyour money by not getting it certified properly at the start. so you want to get it certified properly. i guess i wanted to make that clear to people.

so the easiest way is to find one with thatal fresco area that you could convert. what are some other methods? ben: a lot of the older properties in brisbane,for example, have ridiculously large - like, i'm talking about ridiculously large, likebedroom-sized laundries for no apparent reason. ryan: yup. yeah. ben: and sometimes those laundries are adjoiningliving areas and things like that. so another way that you can do this is tofind that oversized living area with an oversized laundry and get rid of the laundry and basically,you know, box up that side of the house type

ting and covert that into a 4th bedroom anda 2nd bathroom. because it's a laundry already, it means thatthe plumbing is already there and that can save you some money as well. on top of that, sometimes you can look at,for example, 2-car garage under the existing roofline again. or same as the back, like a open 2-car garagewhich exactly the same as the al fresco we talked about. the back is under the existing roofline withthe existing slab. again, you definitely want to get that certified.

you see 19 out of 20 properties in brisbanethat have the garage converted into a 4th bedroom are completely illegal and that'swhy you see them all the time when they're being listed, they're still being sold as3-bedders so you want to make sure that you get that council approved because there issome thing around set backs where the bedroom can be located against the boundary line andstuff. so that's, again, just a simple question fora town planner during your due diligence period, will give you the answer to that as well. so one thing that i haven't heard is basically,building walls and moving walls. so we've talked about the al fresco area.

obviously, enclosing that in. we've talked about converting garages or convertinglaundries into 4th bedrooms. but would there be any situations where youwould divide up a living room and you would put in an extra wall in order to convert itinto a bedroom? or take an existing bedroom and cut in half. are there these scenarios as well? ben: they're the lowest hanging piece of fruit. like, they're the ones that we're lookingfor. we do the other 3 things that we just talkedabout before, but we're always looking for

a larger internal living are that we can easilyconvert. so that is the cheapest way to do it becauseyour'e literally putting up a couple of walls against some existing walls. it's super simple to do that. so, really, that's the ideal. it's what you want - to be able to add a coupleof internal walls. not necessarily to convert a garage or toconvert an al fresco. i guess, they're all good if you can findany of them. ben: there's plenty of examples of propertiesin brisbane where people have taken it from

a 4-bedroom house, 2-bath or 4-bed, 2-bathhouse back to a 3-bedroom, 1-bathroom home because they want for their family and theirlifestyle a bigger living area. so often, you'll find places where you caneven see where the existing walls used to be and it's just as simple as going in andreplacing those walls again. ryan: and putting it back up. ben: yup. and they're the ones that we look for forour clients. because the cost of doing that is insignificantcompared to the return. okay.

this is a great idea and obviously, if peoplewant to explore it in more detail, we're not going to be able to fully cover the ins andouts in this particular video. but just one question to close off this ideais; how hard is it to manage the builders and to get the design done? do people need to go to architects and stufflike that to get the plans done for these walls and to get them built? is it difficult? ben: obviously, you want a licensed builderdoing the work on your behalf so that everything, again, is certified and signed off if anythingever happens in the future.

but the reality is, your property manager,if you're inter-state, should be able to organize that on your behalf. just in terms of getting a builder out there,getting the trades out there to quote it and to bring back a business case for you. if you're local and you want to get your handsdirty, then it's just a case of getting a builder out there, getting their thoughtson it and then having that builder organize trades or organizing the trades yourself. ryan: so this sounds like a really great idea. obviously, we can't go into all detail aboutthis, but you guys can get a builder out to

check it out and to tell you guys what youneed to do or if you're out of state, then obviously, you can get your property managerto organized those builders and get quotes and things like that. converting a property from a 3-bedroom, 1-bathroominto a 4-bedroom, 2-bathroom is really low-hanging fruit. and if you do your research correctly andinvest in the right area where you already know that there's that difference between3-bedroom and 4-bedroom houses, then obviously, there's potential to add $50,000 or maybeeven more to those properties. do you see, when you do it for your clients,do you usually add around $50,000 or is it

more? is it less? ben: it's really depending on the purchaseprice. in some instances, like on a $400,000 property,it might add $40,000 worth of value. where on a $500,000 and $550,000 property,it might add up to $70,000 or $80,000. so, obviously, the more you pay, the morevalue it adds in that area. you can see that in the extremes. if you buy a $90,000 house in some rural areaand you do it, it might add $10,000 of value or something like that.

as you get up the spectrum and invest in moreexpensive properties, then there's more money to be made. let's say that we don't want to do this strategyfor one reason or another, what are some other ways that people can add value to their nextinvestment property? ben: so, i think for those people that areconsidering buying their next investment property at some point in the next 5 years, the easiestthing you can do is identify the stage of the current property cycle and buy in a risingstage. what i mean by that is, you know, howevermany years ago, after the gfc, you would have bought a property in sydney and you hear aboutall these "investors" in sydney that doubled

their money over a 4-year period, but thereality is that they just own property in sydney. [inadible 17:37] i don't think they saw thatcoming at the right market at the right time. the right market. well, i think they'll say they saw it coming. but let's face it, we didn't know that sydneywas going to boom like that. otherwise, everyone would have invested inthere. i think the people who own property in sydney,very few of them knew how well it was going to do.

but good on them for achieving that. but obviously, yeah, getting into a marketthat is going to go up like sydney, it would be ideal because then you're not going toget $50,0000 overnight, but over time, maybe 12 months, 2 years or something, you couldget that amount of growth. ben: we've seen examples of this all overaustralia. perth, obviously, pre-commodity prices comingdown. it was going crazy for 7 years and everybodythat own property there did really well. darwin had the same thing. melbourne's kind of going through somethingsimilar.

brisbane's in a stage where it's looking atdoing the same thing. so it's about just timing that cycle. getting in as close to the bottom as possibleand then riding that growth up. if your strategy is long term buy-and-hold,it can be fantastic. let's say brisbane's average growth is 5%per year. sydney's is 7%. melbourne's is 6.5%. on average, over the last 15 years, you justexpect a slightly above average return for that short growth period and then defaultsomething like back to historical prices.

and we can do an entire video about this ormultiple videos. in fact, i've got a series on how to researchsuburbs to kind of identify these suburbs. so if you guys want, go ahead, go to onproperty.com.au. you can check it out. that course is available inside my membershipsite and me and ben have done videos on it in the past as well, which you can go aheadand check out. obviously, investing in an area that is likelyto grow in the next couple of years, then you can get that growth in that period andyou've got that buffer for yourself where you've got that equity that you can go aheadand move on.

go ahead, check out our other videos if youwant to hear more about that. because otherwise, this video and this episodeis just going to for hours. so we'll leave it at that. what else? ben: in terms of, again, your next easiestopportunity, buying an ugly duckling and doing a basic cosmetic renovation of it. i'm not talking about ripping out every internalwall, re-doing every single thing in the house. but, you know, re-painting, re-carpeting,sanding floorboards. potentially looking at a kitchen, a bathroomtype thing.

keeping that renovation under the $30,000mark and only doing that renovation if you can justify that for every dollar you putinto the renovation, you're going to get at least $2 back out. so you double your money straightaway. and i think there are so many opportunitiesto that and to do nice things on the cheap. sometimes you can go in and it's a pink bathroomand you might not have enough money to completely rip out the bathroom, but there's tile paintthese days. you can paint those pink tiles white and it'sgoing to make a huge difference to the value of the property.

so theres a lot of different little ways thatyou can take a cosmetic renovation and i think what ben means by that is something whereyou don't have to structurally change anything. so you're just painting it, you're puttingnew carpets in, you're maybe replacing kitchen, bathroom or maybe just improving them by paintingthem or something like that. but something where you're not up for a lotof structural cost and all the money that you're putting in is to make that propertylook better and you're going to get more than what you spend back. ben: absolutely. as you said, you can really do it on the diythese days.

i remember a property i bought a little whileago with my wife when she was pregnant with our first bub and we called it "the grannyshack". i think i've talked to you about it before. ryan: no. i didn't know "the granny shack". ben: the granny shack. so we bought it off, it was basically a deceasedestate. the old lady had passed away on the houseand that's another story for another time. but we thought the place was dead set hauntedfor about the first 4 months until she realized

we were actually half decent people, and then,she sort of left us alone. but some weird stuff was happening there. like, tvs turning on in the middle of thenight and things like that. like, weird stuff. but we basically got into the bathroom andi just went to bunnings, literally, and bought some of that tile paint. and i remember sitting in the bathroom paintingit myself and i bought this cheap paintbrush, which was a massive mistake. so there's these strands of hair, like paintbrushstrands, in this tile paint.

but when the young couple that came and boughtit off us 12 months later came to the property, it presented really, really well and theydidn't notice some of the hacks that i'd made to it accidentally, because i'm not a tradesmanand my wife says i actually deteriorate the value of anything we do renovation-wise. but they liked the way that it presented andthey'd pay an extra $110,000 12 months later on a principal place of residence. to renovate that entire house cost us $15,000or $16,000. kitchen, bathroom, everything. and that was a really good way to sort ofturn that money over so that we could move

into a house that we really wanted to livein type thing. cosmetic renovations can obviously be verygood. you want to make sure that you're doing itright. that you're spending money on the right things. as ben said, you kind of want to ask yourselfthe question, "is this dollar that i'm spending going to get me $2 back?" because sometimes we do get so emotional whenwe're doing renovations and we buy this really expensive toilet or something that we alwayswish we had in our house. but just remember it's not for you and youneed to think, "am i going to make this money

back plus double?" basically. otherwise, it's probably not worth doing. have you ever seen million dollar listing,just out of interest? i've seen the ads for it, but i've never actuallywatched it. ben: so, i was watching it the other day,right. and there was this amazing property on thehollywood hills that was like completely unique because of the land value. apparently, in hollywood, if anything is lessthan 10 years of age, they just completely

demo it. like it's just a knockdown-rebuild culture. and so, there's this guy that's owned thisproperty for 30 years. he loved it. it was right on the beverly hills hotel andmassive. he had $110,000 toilet in this place. and the first thing that all of the buyer'sagents did when they came through was said, "we're ripping out the house and throwingthe toilet in the bin." you know what i mean? this guy was devastated, but that's the realityof the marketplace - don't over capitalize.

don't over capitalize. spend things on that the market wants, notwhat you personally want. ryan: so i think we got one more to touchon, which is buying below market value, which you have a lot of experience in. so trying to make that 5%, at least, on theway in. the easiest way to do that is to jump on - ifyou don't have the paid tools - jump on something like realestate.com.au or get a free 30-daysubscription with someone like real estate investar and just get to know the suburb thatyou're purchasing in inside out in terms of everything that you can possibly find thatsold in the last 12 months.

try and identify where market value is andthen, simple, just try and buy below that. and so, what you're saying is that go through,look at everything that's previously sold, and then look at the current properties onthe market and look for something that's undervalued compared to what's previously sold, is thatwhat you're saying? and if you can buy undervalued in a risingmarket and then, cosmetically renovate or add bedrooms and bathrooms, there's 4 simplestrategies. it will almost be impossible to not make $50,000in the first 12 months. ryan: well, that's the thing. we talked about 4 different strategies, right?

so converting from a 3-bedroom to a 4-bedroom. doing a cosmetic renovation. buying in a growth market or buying 5% belowmarket value. but really, you can do one of these or youcould do all 4 of these. and the benefit of doing multiple is that(a) if one of doesn't work, then you've got another one to back you up that could work. so if you buy in a growth market and hey,it doesn't grow, but you do a cosmetic renovation, then, you can still get that growth. or, they could compound upon each other andyou could find yourself in a very happy situation

where the market's grown, you've done a cosmeticrenovation, you bought below value and you've converted it as well. and a lot of the sophisticated that i talkedto that own 5 or more properties might not go and do all of that stuff at once. they might just buy well, then they wait 12-18months for the market to rise. then, just before they want to get it re-valued,they may come back and do a cosmetic reno. and then, in 2 or 3 years' time when theyneed more equity again or they want to increase the rental return, they'll do the bedroomsand bathroom. so a layered approach can be really smartas well, especially when a market starts to

soften and nobody else has got an opportunityto add value, but you can still get a 5% or 10% gain by doing a few of those things ina flat year. and that's something that could be so excitingfor a lot of people because they might think, "look, i love this idea of converting a 3-bedroom,1-bath into a 4-bedroom, 2-bath, but it's going to be hard enough for me to stretchto buy that property. i'm not going to be able to afford the renovation." but hey, you could buy it, hopefully, in agrowth market as well, and then maybe just rent it out for a couple of years of you'restrapped for cash and you need that cash flow coming in.

and then, when your financial situation improves,or as ben said, when the market changes and you decide, okay, now it's time to do it,the opportunity is still there. it's not going to disappear. your floor plan is not going to change magicallyor something overnight. if you've bought with that opportunity inmind, then you can do it later when you can afford it. really good point, 100% agree. i think we'll finish it off there. obviously, this is not like a magic bulletthat's just going to happen automatically.

it's something that does take effort, thatwill take time. it's going to take a lot of research to findthe right areas, to find the right properties. and so, you're not just going to go out there,go on realestate.com.au and the first property you look at is going to be like this. there's a lot of properties in that are overpriced,that don't have opportunities. and so, i think i would leave you guys tosay, take your time, spend the time now to find the right property so that you can makemore money down the track. don't just get over excited and jump intoit and buy wrong thing. ben: do what i do when i first started.

ryan: what's that saying? a stitch in times saves nine? ben: correct. i saw this awesome little thing the otherday from the guys at the property couch podcast and they were talking about the differencebetween 1% or 2% extra capital growth per year over a 30-year period. and you're talking about $500,000 on a 500kproperty. it's absolutely imperative that you do theright thing and get the right property at the right time.

do the right research. don't just buy now, whatever you think. awesome. thanks so much for your insight on that, ben. i hope that this has inspired you guys togo out and look for these types of properties. and the next time you're investing, try toconsider; okay, would adding $50,000 in equity to my next investment property, does thatfit in with my plan? does that fit in with what i'm trying to do? and then, if it does, we obviously wish youthe absolute best of luck.

you can check out more about me at onproperty.com.auand ben is a buyer's agent and he helps his clients find properties like this. so if you're like, "yes, i want to do this. but i don't have the skills or the time."and you want ben's help, then he does work as a buyer's agent helping people find theseproperties. so, if you want to check him out, he's actuallyoffering free strategy sessions to listeners of on property. so if you want to get on the phone with benand to chat about this strategy and to see if it's going to work for you, then go aheadand go to onproperty.com.au/session and you

can go ahead and book a strategy session withben over there. that's probably going to be the best way forpeople to move forward if they want some help in doing this. that's it from us today, guys. until next time, stay positive.