Highest and Best Use

One of the aims of any investor is to have their properties operating at their best use. See, your properties are working for you or you are working for them. 

Even if properties fall behind the median rent you begin the cycle of obsolescence, meaning you attract lower quality tenants paying a cheap rent with more and more maintenance problems mounting up. It’s a vicious circle. 

In development the same is true – have you ever struggled to get petrol in the inner city? Well that’s because the property owner won’t want a petrol station if zoning allows them a 40 storey apartment block. That’s its highest and best use.

An error I see is land banking. Its sitting on land and waiting for the values to rise and then develop. However, the problem is that it’s a poor cashflow, a large parcel of land with a property that will be eventually demolished. But if the owner never has the means to develop the property it’s a poor strategy for wealth. After years of sitting on the parcel of land the investor eventually sells to someone with means to develop at a fair market price. 

This week we handed over the Pilliga project. When purchased there was an old, tired house receiving $400 per week on a parcel of 1215 m2 in Wavell Heights. Now stands three new modern houses worth 1.4 million dollars each and owing 1.1 million each to the investor. This is highest and best use. Built and project managed by HQ Constructions. Purchased on the 19th of May 2018 – means the project took 3 years nearly to the day.

Now that may seem big numbers and not for everyone. But we can do the same via renovation, one for ones, or like in the above example, a triple splitter. 

·      Executive tenant

·      Premium rent

·      Manufactured equity

·      Positive Cashflow with depreciation.

Shannon Davis

Building your wealth through property.