What is value addition?
Value addition is the creation of extra value over and above the original value of land and real property. It is a higher-return/risk strategy, with returns based primarily on capital growth through careful, active asset management. The risk/return profile of an asset determines its market value. As a result, investors seek to increase their capital value by increasing their potential Return On Investment or lowering their future risk.
What are the benefits of Value Addition?
Avenue for asset appreciation.
Long-term cash flow.
Potential boost of Return on Investment
How can one add value to bare land?
- a) Ensure there is good accessibility.
Accessibility to a parcel or piece of property is a high-ranking need, that deserves top priority. Whether the parcel is located in an urban area or in a rural area, access to the parcel should be navigable and unobstructed. Lack of good access can have some adverse effects not only on the potential use of the parcel but also on its value. This can be done by providing access roads, through road construction, or by digging up temporary pathways to the area. Road grading can also be an option for improving access. Whatever the case, as an investor, access to any property should be easy and convenient.
- b) Add on utility lines.
One of the key ways of adding value to bare land is through the provision of utility lines. Utility lines include electricity, water, and sewer connection. All these are important for the survival and operation of people who reside in the parcel or hope to make use of the parcel in any way of benefit to them. This means that connection to utility lines is a crucial need, that has a direct bearing on realizing the potential value of the piece of property.
- c) Build structures.
Adding structures s simple as a caretaker housing or storage point is known to greatly help in increasing the value of the land. However, it should be well noted that the structure needs to be beneficial to the current and future use of the land.
- d) Conduct a land survey.
Understandably, not very many people are aware that one can easily get land surveyance services for their small land investments. To make it worse, not very many people see the need for land surveyance, until they realize that there is a necessity for it prompted by new developments. Part of the information obtained from the survey includes;
– The boundaries of the property.
– The topography and soil types of the property.
– Any restrictions attached to the property. – The location of any easements.
- e) Farm the parcel
If you own farmland, putting it to good use will greatly boost its worth. The crop will not only bring in money, but it will also improve the aesthetic appeal and also help in environmental conservation. Your production records will prove the land’s worth and help in pojecting returns.