Is it a good strategy to renovate or develop an investment property?
The value of a property consists of two components being the land plus any improvements i.e., the dwelling. Generally, land appreciates in value whereas buildings depreciate over time due to wear and tear.It is possible to manufacture equity in a property by making improvements e.g. renovating/rebuilding the existing dwelling or constructing multiple dwellings. This occurs when the end value of the property exceeds its cost e.g. spending $100,000 on a renovation improves its value by $150,000, thereby “creating” $50,000 in equity.This blog considers the merits of this strategy.The theory…
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