“Where’s the equity coming from if the market’s flat?”
A client asked me this last week and it’s the right question to be asking. Although to be clear, not all markets are flat right now. Plenty of regional markets are moving quickly. But whether your market is flat or running, waiting for growth to do all the work isn’t much of a strategy.
My answer was value add in regional markets with good fundamentals.
The play
It’s simple. You buy around the $500k mark, target something tired but structurally sound, and do a small cosmetic uplift. Paint, floors, kitchen, maybe a bathroom. Nothing that requires a development degree.
Done in the right market, you’re adding close to $100k in equity once it’s finished. The rent lifts too. So you’ve manufactured both yield and equity, and you’ve done it at a time of your choosing rather than waiting for the market to decide for you.
The key words there are “the right market.”
What most people miss
Three checks decide whether this works, and most people skip all three:
- The uplift only works if renovated stock actually sells at a premium. You need to see it in the sold data before you buy, not hope for it after
- Rental demand has to be genuinely tight, otherwise your rent bump is theoretical
- The town needs real economic depth, not one employer holding the whole thing up
One regional NSW city we’re buying in right now ticks all three. I won’t name it because my clients are still active there, but here’s the shape of it: the typical house sits in the mid $600s while the unrenovated stock trades around $500k, so the gap is already proven in sold data. Around 100 rentals available across 30,000 plus dwellings, with rents at roughly $500 a week. And over 1,200 sales a year, so there’s liquidity if you ever need out.
The metric almost nobody checks
Non-residential building approvals. That’s the value of everything being built that isn’t housing: warehouses, logistics facilities, retail, health and education infrastructure.
In this market it’s running at over $3,600 per resident in the past year. That’s businesses and government committing real money to buildings that create jobs. Jobs bring people, people need housing, and that’s what underwrites your rent and your equity. When I talk about screening suburbs on fundamentals, this is the kind of number doing the screening.
A quick note on granny flats
They come up constantly in these conversations, and they do work in some of these markets. A second dwelling can genuinely stack the numbers. But it’s not a blanket fit. Run the feasibility properly for that specific market before committing, or use our free analyser to kill the non-starters early. More on the rules in our granny flat guide.
Take one thing from this
Go pull the sold data on renovated versus unrenovated stock in a market you’re watching. That gap is your margin. If it’s not there, neither is the play.
And if you’d rather someone did the pulling, screening and negotiating for you, that’s literally the job. The first chat costs nothing but 15 minutes.