You can create additional income by selling upgrades or optional extras with your sections or homes. It may be all your competitors are doing this and you must provide optional extras in order to compete, or no one else is doing it and this is your point of difference. You can offer just a few upgrades to add interest to your sales and marketing or a whole household menu of items. The extreme example is where every home is customised to the individual purchaser such as when you provide full interior design services.
What you offer as an upgrade means you are not providing it as part of your standard base product pricing, so this needs consideration in light of your competition and target market. Your buyers may consider some upgrades as necessary items and view an upgrade as cheapening the base product. For example, while offering a tile upgrade to vinyl flooring in the bathroom may be reasonable for affordable housing, it would be ridiculous to have vinyl as standard for luxury homes.
Upgrades and optional extras to your sections and various house features are only limited by your imagination and the vast amount of products available. Here are some ideas:
Sections
- Fencing packages.
- Taking grassed building footprints to foundation ready with hard-fill and retaining.
- Driveway crossings.
- Adding additional services like gas (assuming the main trunk gas line is installed).
- Irrigation.
- Section contouring and landscaping.
- Retaining wall upgrades (from timber pole to crib wall or stone).
House Structural, Services & Design
- Room conversions like adding a bathroom, extending a toilet to include a shower or turning a second living into a bedroom.
- Adding a kitchen island, extending benchtop.
- Skylights.
- Upgrading sliding doors to French doors or bi-folds.
- Adding electrical and data points.
- Electrical upgrade to gas water/cooking.
- Underfloor heating.
- Heat pumps/air-conditioning/fireplace.
- Air pressurisation ventilation systems.
- Burglar alarms and intercoms.
- Sound system wiring.
House Finishes & Fittings
- Hardwired appliance upgrades (dishwasher, oven, range-hood).
- Appliance packages (fridge, washing machine, dryer).
- European (or more luxurious) kitchen and bathroom fittings.
- Feature lighting.
- Feature kitchen tapware.
- Rainwater shower head.
- Tiling material upgrades.
- Tiling from floor only to floor and wall.
- Kitchen and bathroom benchtop upgrades (laminate to engineered stone to granite to marble).
- Carpet weight or quality upgrade (from 20oz to 32oz, from synthetic to wool).
- Wardrobe organisers.
- Garage storage systems.
- Garage marine grade carpet.
Home Furnishings
- Curtains and blinds.
- Custom furniture packages (beds, sofas, tables, chairs).
- Custom built-in cabinetry.
External House Works
- Decking and paving.
- Pergolas and sun shades.
- Clotheslines.
- Security lighting.
- Video surveillance.
- Utility sheds.
- Swimming pool or spa.
- Green waste systems.
- Letterboxes.
- Landscaping packages.
While it is all very well to offer a vast menu of extras to buyers, they do present delivery complications. Product selection needs to be confirmed before the house reaches the relevant stage of construction. Confirming upgrades during the pre-sale stage allows you to add them into construction contract negotiations. However, once construction has started you will need cut-off dates for when upgrades can still be accommodated that don’t delay the construction programme. Items such as tiles can have long lead times so the cut-off date may have to be many months before installation.
Managing the delivery of numerous extras requires additional resource and systems from agent, developer and contractor. You may already be offering different colour options, and integrating additional upgrades can get complex. If your project has multiple house designs, an option may require different pricing based on each design. For example, upgrading the carpet requires each house type to be measured. Adding a room may be simple in one house type, but require structural changes in another. Some extras may require design changes by the architect or other consultants or even a revised building consent, increasing the cost and taxing management resource further. Without a dependable communication process (from buyer to agent to developer to project manager to designer to contractor to subcontractor to supplier to manufacturer), mistakes will be made. Resolving the mistake later (like adding a wall) can easily affect the critical path and cause rework with additional cost.
For those reasons you have to charge a high margin to the purchaser, on top of the contractor’s margin, to justify providing upgrades and extras in the first place. When the real cost is promoted it may look very expensive to purchasers and deter them from upgrading.
Offering supplementary upgrade services beyond physically altering your product is a further option. Consider financial products by establishing relationships with funders and mortgage brokers. You could also provide post completion management services. If you convince suppliers that you are presenting them with a captive market and purchasers in bulk you should be able to secure some favourable deals. These can include:
- Lower interest rates (bank promotion for the development as opposed to the developer buying a lower rate for buyers, effectively hiding the cost in the purchase price).
- Low deposit bonding.
- Discounted property insurance.
- Advanced financial engineering products such as rent-to-own schemes and equity share.
- Property management and letting.
- Property and landscape maintenance.
- Long term home warranties or new build insurance (if not already provided by builder).
- Utility service agreements (i.e. you become the retailer to the home buyer by securing a distribution agreement with a wholesaler that allows you to take a margin).
Upgrades can equip you with negotiation ammunition in a softening market. You can throw in some extras when negotiating one on one with buyers or even convert some of your upgrades into your standard offering without decreasing your purchase price. Of course this will hit your bottom line profit but it will provide greater psychological value preservation (to potential buyers) than dropping prices or offering gimmicks like a ‘free holiday to a tropical island’.
Andrew Crosby
+64 21 982 444
andrew@xpectproperty.com
