The majority of real estate investors generally purchase property that has already been developed and built, or slated to be constructed.
Whether they are owning the property long term and renting it out, or improving the property and selling it immediately, they are essentially holding onto the property for some duration.
Although this has been a great strategy for many investors in years past, this is only 1 piece of the puzzle, and is the last stage of real estate wealth creation. Given the cost of existing real estate, this strategy alone is becoming increasingly difficult, as there are many others competing for the same existing inventory.
There are 2 other stages in real estate, where wealth has already been created for other companies and investors.
We like the think of real estate wealth in 3 different stages, which are:
Stage 1: Land development
Stage 2: Construction
Stage 3: Holding
So if you’re only utilizing the wealth generation from Stage 3, are you leaving money on the table?
We certainly think so.
Given the current environment of unprecedented population growth, a massive under-supply of housing options, and government policy to intensify our existing neighbourhoods, now is the perfect time to get into Stage 1 and Stage 2 of real estate in the form of infill developments.
Using the infill development strategy, many investors are starting to take advantage of being able to unlock additional value in the tens or hundreds of thousands of dollars. A great example are folks who are purchasing an existing home, improving that property with upgrades and putting in an additional unit. They then further develop the land by severing the lot and building another home with a second suite.
This also helps to resolve the issue of having to compete with others in the market for housing options, because you are creating your own!
Although there can be challenges, this type of small-scale infill development is encouraged by many municipalities, as they are eager for developers and investors to provide the necessary housing to support our growing population.
This is a strategy that is still relatively new for many investors, and it’s something you want to be ahead of the curve on.
We certainly recommend that you also take advantage of real estate wealth creation in the first two stages of land development and home building!