Buying land off of your neighbour?

[Corporategirl]

Hi Everyone

I have been reading these boards over the last year as we have started by dipping our toes into property investment.

Our PPOR is on a good size block (829). If we were to purchase enough land off of our neighbour, we could then be in a position to have a subdividable block (R20).

Alternatively we could buy their property, take the extra land and resell the property?

Our neighbours are looking at selling in the near future, as unfortunately their marriage has dissolved, so we thought we would approach them about this.

Has anyone ever done this and if so was it a difficult process?

Thanks

 

[Scott No Mates]

Both are options however buying adjoining land then doing a boundary adjustment may not comply with the intent of the LEP. ie although you may need a minimum sized block, it may not be permitted to amalgamate two blocks to achieve the outcome.

 

[thatbum]

Has anyone ever done this and if so was it a difficult process?

Thanks

Its a much more difficult process than probably most people realise. I'd be surprised if it was possible with the numbers also working out.

I wouldn't suggest it if you're just starting out in property investment.

 

[HD_ACE]

How big is their block? And which council?

Cheers

 

[Corporategirl]

Our neighbours block is currenlty 773m2.

Our local council is City of Melville

Our block is almost rectangular (21m frontage) and I think 20.5m at the back.

Next doors is angular on one side (the one that doesn't contact ours) - 20m frontage goes to 18m at the back.

Not sure if this extra info is helpful.

We are also going to have a chat with City of Melville too as part of our research to even see if it is a possibility.

 

[nhg]

We are also going to have a chat with City of Melville too as part of our research to even see if it is a possibility.

Certainly do that first. Though don't expect the answer to be definitive. I personally find councils give very vague and non-committal responses.

These things are a lot more expensive than you may imagine. The few $$$ you'd be paying your neighbour is only a part of a much larger cost.

 

[wylie]

Definitely talk to the local council. A friend of mine one house in from a corner bought both houses with back yards adjoining her side yard. First one she bought gave her a bigger yard. She rented the new house whilst realigning the boundary and after a couple of years, resold the house on the smaller block and kept the back yard, which was by then her "side" yard. When the house on the corner came on the market, she bought that, did the same thing and this time she cut off the back yard with a pool and resold the house on a small block.

Her yard is now probably nearly twice as big as when she started.

Buying the houses next door and "keeping" their back yards gave her what she wanted (bigger yard plus a "free" pool), but she has no plans to develop her larger block.

 

[thatbum]

Our neighbours block is currenlty 773m2.

Our local council is City of Melville

Our block is almost rectangular (21m frontage) and I think 20.5m at the back.

Next doors is angular on one side (the one that doesn't contact ours) - 20m frontage goes to 18m at the back.

Not sure if this extra info is helpful.

We are also going to have a chat with City of Melville too as part of our research to even see if it is a possibility.

I live in City of Melville. Their planners are quite good and approachable and I imagine they will say its technically possible.

But what's the end goal? I imagine you could bulldoze both houses and get 3 lots at R20. But I'd be surprised if that was worth it.

 

[Corporategirl]

Thanks for all of your great responses!!

I really do appreciate the feedback and suggestions.

End goal is for our block to be 900m2 so that we can eventually subdivide ours into two lots of 450m2. We are very close (within 1km) to Murdoch train station, Murdoch uni and new Fiona Stanley hospital.

Depending on the cost (and whether this is worthwhile or not) we hope to have two good size building blocks in a suburb where many 30 year old homes are being rebuilt. Our initial figures (guesses which need to be qualified) shows that this would be financially viable.

As I mentioned in my first post, initially we were going to just buy the bit of land from our neighbours but then got the idea of buying their property in total (but only if we know we can definitely do the land chopping off thing).

Will get onto City of Melville tomorrow......

Cheers

 

[mrhet]

Re buying land off neighbour

Several years ago, I was in the same predicament. My neighbour was selling at the time, and we also wanted to sell. We knew our neighbours reasonably well, and had heard that our other neighbour also wanted to sell.

I figured that if we approached a local agent who would be interested in all three properties, then maybe they could sell it to a developer.

This is exactly what happened, and the developer ending up buying ours, and one neighbours property. We made a huge profit on this property and didn't have to worry about developing it ourselves.

Easy way to make money without the headaches

 

[paulie]

Hi Corporate Girl,

I'd probably buy the neighbours Block, but i would look at adding land to their property and then demolishing & sub dividing into two blocks for immediate resale (or build on one and move into it) and keeping your house but on a smaller block as you currently have primary residence capital gains tax exemption on your own home, but if you demolish it and turn it into two blocks - that tax exemption disappears.

Adding some additional land to your place might give your property the ability to become two $600k + blocks if you subdivided it - but if you're selling your home on an un sub divideable block with the potential to sub divide, the increase in it's likely sale price today from a suburb top end ave of approx $900k today to about $1,000,000 that an investor might pay, doesn't cover the costs of buying the neighbour and going through the process.

Also - you only need to add around 20 sqm to your property to now be sub divideable into two street front blocks (855sqm is the absolute minimum R20 block that can be subdivided using the 5% variation on the average lot size, and with the two proposed blocks being 425sqm + you are well over the minimum lot sizes of 350sqm).

440 sqm 10 m wide Land in Bullcreek and Bateman if for sale today would currently fetch north of $600k each block - and i imagine the yours and your neighbours house will be 30 to 35 year old properties currently worth around the $800k to $900k mark.

At 773 sqm your neighbours property only needs another 82 sqm of land and a total frontage of 20 m (855 - 773). I expect the total cost of the amalgamation and sub division to be in the $75k range, added to whatever it costs you to buy your neighbours house - let's assume $800k + stamp & sett $34k - selling fees of two blocks of land $20k = a total expense of $914,000 against a likely return on the sales of two blocks of $1,200,000 - probably more, land is really scare in Bullcreek and Bateman - only 5-6 sales in last two years- see attached.

cheers

 

[Corporategirl]

Hey Paulie!! Thanks so much - my husband and I love your thinking!! You have helped us view this opportunity in a whole new light.

We have still been doing our number crunching - which pleasingly was quite close to yours in terms of costs. But we were close to almost giving up because it wasn't just working for us.

We have been more conservative with our profit margins compared to you but that is because we are not talking Bateman or bull creek - we are in Leeming.

A couple of things that we need to think through are:

1. The way the houses are situated on the blocks it is much easier to gain the metres from our neighbour rather than from our place as their house is a good 3+ metres from the boundary, whereas ours is 1 metre off.

2. Also our neighbours house is renovated - ours is ripe for renovation (that is putting it nicely). Therefore it would be more beneficial to knock down ours rather than our neighbours.

Not sure if you know, will have to ask our accountant, but I will ask anyway. Can we buy next door, move in, make our old house our "IP" and then change boundary fence etc and then knock over, sub divide and sell and reduce the capital gains payment that way?

Thanks again!!!