$64 Question - valuation

From: Lotana Von Amor

Hello, Respectable Forum,

I need your help.
A group of friends is considering to buy block of units in Sydney Eastern suburbs to renovate. The block looks really bad, but has great location - opposite a beach, ocean view from all units. The block is not on the market. We approached the owner directly and he is willing to talk. Now we need to come up with an offer, but before we do that we need to do the sums. None of us has experience in property development or large renovation projects. The block is on torrens title. The plan is to "Stratify" it after the reno. Now the question:

If I have sale prices for similar new/normal/renovated STRATA units next door, how can I derive current value for run down units in the TORRENS title block?

Thank you,

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Reply: 1
From: Kristine .

Greetings, Honourable Lotana

Actually, the $1,000,000 question is CAN the block be strata titled?????

First check should be with the municipality, clutching a letter from the current owner stating that they have no objection to you obtaining a copy of the building plans. This should not cost you more than $50 in Council fees, although you may have to wait a day or two while they retrieve the plans from archives.

Then, you discuss the plans with the municipal building surveyor. Does the construction, as it now stands, meet fire regulations or any other statutory requirements necessary for subdivision? You will also need to enquire re NSW regulations regarding 'owner builders', warranty insurance for renovations over what $ value, etc. The Council will know all this, and the information is free.

If the building doesn't measure up with fire regulations - well, I think I'd be thanking everybody for their time and quietly walk away, richer for the experience and more aware for the next time.

If yes, but - modify this, comply with that, etc, then go the next step and have an informal chat with each of the last three draughtsmen/architects who have drawn up similar renovation plans submitted to the Council.

These professionals will be aware of current compliance standards, prices and who does what in your area.

However, apart from the building plan fees, do not spend any other money unless you want to proceed with a comprehensive feasibility study and have a contract of sale, subject to whatever. It may be more economic to bulldoze and start again, but you are really going to have to do some legwork, including lots of comparable sales, before and after horror/success facts, and don't forget that insurance to cover unoccupied buildings undergoing renovation is expensive, and so is finance.

It sounds like a very ambitious project. However, it could be done in stages, eg you buy it, get accurate drawings and estimates, and hope to onsell the project to a builder capable of completing the project; you buy it, renovate each unit as it becomes vacant, relet it; buy it and go through the subdivision process, then renovate and sell as each unit is complete, etc

If it was easy to subdivide, wouldn't the current owner have done it?

Good luck - it's an amazing buzz once the imagination starts wizzing around, and anything is possible if you are prepared to put the effort in

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Reply: 2
From: Lotana Von Amor


Thank you for you excellent practical intro.
I still have a valuation question though. How would you value a property like this? Suppose there are 6 2 b/r units in the torrens title building. Similar strata title units sell for, say, $500K renovated. Would it be a reasonable to assume 20% discount for the title + 10 % discount for the reno and value the whole building at 6x$350K=$2.1M as the first estimate? Or should I take more factors into account?

You may e-mail me directly if you wish.

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Reply: 2.1
From: Ross V

Hi Latona,

While I don't wish to take the wind out of your sails, under sepp10 (state environmental panning policy No10)your chances of being able to strata these units are virtually nil.
Having said that there is perhaps the option of company title.
As to costs there are alot!
If you wish to talk to council and still think it may be feasible feel free to e-mail me and i will give you a breakdown of probable costs and perhaps a feasibility.

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