Some years ago I purchased a shop with an apartment upstairs in Bondi.
Over that time it's produced awesome cash flow for me.
A few years ago, with zoning and planning changes in the area, I was able to build up and adding two apartments above which added to the cash flow considerably.
The original leases, of course, had built in rental increases, which, subsequently increased the value of the property over time.
But when you start adding on apartments, you not only increase the rent but also the value of the property.
I love doing these projects from time to time because at the end of the day, once you start adding on additional sources of income to an existing property it's like getting equity from a free bit of land.
Of course, the land is not free – but it can seem that way because it's already being paid off from the income from the existing leases… so adding more doesn't take away anything from what's already there.
What's awesome about this is that as population increases and demand for housing grows, zoning and council changes.
At the back of this property was an old concrete stairway and an ugly carpark.
So when the zoning changed, I realised that I could add even more.
It has taken around five years of planning and discussing with the local council, but I finally got the approval to build three small apartments in the space in the back.
I had them built by a modular building company in Melbourne. The whole thing was built inside a factory.
just a few weeks ago 16 Massive trucks arrived with a police escort and blocked off the whole street for the day.
By the end of the day, I had a four-story apartment block completely built – we literally had a walk around in the top floor apartment by 4 pm.
It's been an amazing experience – the apartments will add another $2300 a week in rent and another $1.1Mil to the equity in the property.
How is all this possible? Because it's a commercial property in commercial zoning. That means that what you can do to the property is so much greater and more creative.
I have another property in Newcastle where the council had made zoning changes allowing me to build up to 9 stories in the backyard…
I mention all of this because I see so many deals fail because people get hung up on the price of the deal and the cash flow they are going to get.
If you buy the deals that have these hidden upsides (even if you can't implement them right then), you are storing away these huge opportunities for your future.
The right property will be like this Bondi deal… the goose that laid the golden egg.
Looking down the back lane now is my cool new modular building and I see building after building just waiting for the same kind of development to be done.
No one's doing this stuff which means that when you get the hang of commercial, there are more deals that you could possibly ever do during your waking hours.
More money to be made, and more deals than anyone could ever have time to do – and the demand is not set to let up for decades.
But you have to master the basics first. Get your head around how commercial works, how to pick the right deals and how to spot hidden upsides…
Get that and the deals and the wealth will follow.
Want to know how to buy “The Right” commercial property?
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