Case Study:
The Lake Houses - Residential Development Project
Scenario:
The Lake Houses were an initial investment in the Northern Beaches on a 1200 square meter block. The block itself offered excellent organic growth opportunities and was large enough for future development to manufacture additional growth.
Budget:
$1M
Development Cost:
$2M
Value on Completion:
$6M
01.
The Strategy
The strategy was to acquire a property offering both organic and manufactured growth opportunities. Development potential was a must, but was not necessary in the immediate future. Instead, the goal was long-term growth allowing the property to develop equity and then use the equity to support the development of two high-yielding luxury homes.
02.
The Approach
EQ Property focused on three elements to find the best location for this investment:
Demand
What areas do people want to buy property or establish a business?
Supply
Where are there restrictions that will reduce the ability to meet that demand?
Demographics
Who lives in the area, what are their incomes, how much are they willing to pay?
Sydney’s Northern Beaches checked all three boxes, with investment opportunities available at the $1M mark. The ideal property is in an area with high demand growth opportunity, reduced opportunity to increase supply due to local limitations and the right demographics with money in hand willing to pay top dollar to own a home where supply is limited.
03.
The Plan
The plan was to find a key location that offered properties within the $1M price range, allowing for both organic and manufactured growth. With development in mind, the property had to accommodate at least two homes. There was no urgency to build, and instead, the investment would be held over time to grow equity through organic growth.
04.
The Results
A property was purchased in the Northern Beaches as planned for $1M. Within eight years, the property had doubled in value to $2M with no effort or further investment required. The time was right to invest in developing two luxury homes on the property as inventory was limited and demand was high.
The amount invested in building the homes was $2M. The combined profits from the organic growth and the manufacturing growth from the home development investment of $6M achieved equity of $3M. The strategy worked as the location contributed $1.5M of organic growth, while the opportunity to manufacture further growth through the build contributed another $1.5M.
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