3 Townhouses v Reno + Granny Flat

[aussiesologirl]

Please provide advice on the following situation:

I bought a 1959 PPOR in 2005 as a knock-down rebuild in need of a substantial reno with the intention of developing until 2010 when mortgage would be nil. Circumstances meant no action until now but with recent Gosford CC zoning changes I find myself needing to make an urgent decision: do I knock-down and build 3 townhouses or reno my PPOR and build a granny flat in back yard?

PPOR Purchase price: $300k
Cost of 3 townhouses $700k (selling one at $500k, renting one @ $400 p/w and keeping the other)
Cost of reno & granny flat:$200k (I would move into GF and rent out PPOR ($400 p/w)
Existing mortgage Feb 2014 $70k
I am single so res property can be small

Issues:
Need for accomm during townhouse build so I would still be paying residual mortgage + rent (will be tight on single avg income)
I could build GF, move into it then reno the main house (no rent + mortgage required only increased mortgage which I can cover now)
While I want to build the townhouses, it will be a stretch of finances and the house + GF seems like a cash-cow.

Any advice would be appreciated.

 

[HD_ACE]

Can you build one town house at the back while you live in the old house. Then on completion move into new house, demo old and build two more ?

Imo townhouse development over gf if you can fund it all and any unexpected costs. Mainly because of the equity gain, cashflow and ability to sell them off.

Cheers

 

[Scott No Mates]

Asset value when built - $1.5m

Building the townhouses, sell one, rent one, live in one means you will end up with two t/h (worth $1m), a rental income of $20k + depreciation and a debt of around $500k (less taxes, selling costs etc).

Building the t/h, sell two will result in small mortgage (even after taxes & selling costs) and a brand spanker for yourself

Build t/h, sell all three, resultant profit, say $400k

If you only do the granny flat & refurb the house you will have a larger mortgage, small cashflow, someone else in your yard and a asset value of less than $500k (and no experience in development work).

For me, it'd be a no brainer - go the townhouses

 

[aussiesologirl]

Thanks HD_ACE for thinking outside the box but I don't think I would get a builder to do this. All builds I've seen are completely blank/vacant blocks before they start which is obviously much easier to have all the services disconnected before they start working/digging.

I know you're right about the townhouses as the best option but I'm hesitant as for me (who's always strictly managed budgets) it's pretty scary getting having such a large debt but the brave prevail!

 

[devank]

I created this spreadsheet to see what options I should take (BAU, Granny flat or Duplex).
You can modify to suit your needs. Sometimes it is lot easier to make a decision of you have the numbers infront of you.