Buying/Valuing Land

[bateman84]

Hi All,

1st post - i am new to property investing but have been investing/speculating in stocks for years. i have reasonable cash savings of around $100k and i'm looking to buy a block and build a first home that can later be rented well (i'd like to work overseas in coming years).

i am after general comments and advise relating to doing self-assessments and valuation on land prior to making offers and beginning negotiations.

i have only been using the price per m2 metric and comparing to nearby listings. i have noticed some land has easements or right of way and they are discounted on a $/m2 basis. is it best to discount the easement and value the block on the unencumbered portion?

do you find that the $/m2 curve is fairly linear across the block size range? i.e. say land is $1k per m2, 200sqm is 200k and 600sqm is 600k - or is there a lower limit where a smaller block will be worth more per metre than larger blocks?

one particular block i saw was a subdivided lot that is currently a parking lot. i'd like to apply some sort of discount to allow for the cost of bringing it back to scratch i.e. removing bitumen and level for build. i assume this would be typical practise?

other issues i have seen are where the high voltage cabinets are located on the lot. however, i have noticed many places seem to build right up to about half a metre from them and allow access so it really does not cut back the space too much.

anyway, looking forward to learning a lot from you guys and any advise for valuing and buying land is much appreciated. i am primarily interested in land as i'd like to build my own place and think i have more chance of adding value by picking up a cheap block and being creative with what i put on it.

cheers!

 

[Aaron_C]

Vacant land is usually discounted per sqm as the land is bigger, plus with other easements etc that negatively impacts its value.

 

[Shahin_Afarin]

Look at:

1. Location
2. Zoning
3. Council
4. Measurements of the block
5. Any issues with the block (easements, bush fire prone, road widening, etc)

 

[georgie1]

You are looking at the value the wrong way. You need to understand that property can't be technically valued like a stock can.

All you can do is look at what comparables have sold for when it comes to residential. www.onthehouse.com.au is a good site for this.

Find something you like in your price range, look at comparables (for sale and sold) then discount or even increase your asking price depending on features such as aspect, easements, sub division potential etc.

But remember, even if you block has a better location compared to neighbouring blocks it does not mean it will be worth more in the eyes of a valuer and so this could lead to a valuation shortfall and an issue with finance if you over pay.

 

[tobe]

one particular block i saw was a subdivided lot that is currently a parking lot. i'd like to apply some sort of discount to allow for the cost of bringing it back to scratch i.e. removing bitumen and level for build. i assume this would be typical practise?


It sounds like you are looking at new estates? Subdivisions? its dificult to negotiate discounts with large developers, much easier on established properties who are being sold by mums and dads etc.

If you are really set on new estates, usually the builders on that estate will have the most chance of getting a discount off the land. Note also that new estate covenants mean you really need to have a house design in mind before you purchase a block. each block is specific as to what can or cant be built, double storey, long or short etc.
many blocks are cheap because they are built up over old dams etc. The build cost is more expensive because the foundations then have to be deeper.

To quote an old hand 'there is no such thing as cheap land'.

NB, dont get sucked into a rebate or gifts instead of a discount. they arent worth anything to you at all. Nothing. Just a headache.

 

[westminster]

Hi All,

1st post - i am new to property investing but have been investing/speculating in stocks for years. i have reasonable cash savings of around $100k and i'm looking to buy a block and build a first home that can later be rented well (i'd like to work overseas in coming years).

i am after general comments and advise relating to doing self-assessments and valuation on land prior to making offers and beginning negotiations.

i have only been using the price per m2 metric and comparing to nearby listings. i have noticed some land has easements or right of way and they are discounted on a $/m2 basis. is it best to discount the easement and value the block on the unencumbered portion?

do you find that the $/m2 curve is fairly linear across the block size range? i.e. say land is $1k per m2, 200sqm is 200k and 600sqm is 600k - or is there a lower limit where a smaller block will be worth more per metre than larger blocks?

one particular block i saw was a subdivided lot that is currently a parking lot. i'd like to apply some sort of discount to allow for the cost of bringing it back to scratch i.e. removing bitumen and level for build. i assume this would be typical practise?

other issues i have seen are where the high voltage cabinets are located on the lot. however, i have noticed many places seem to build right up to about half a metre from them and allow access so it really does not cut back the space too much.

anyway, looking forward to learning a lot from you guys and any advise for valuing and buying land is much appreciated. i am primarily interested in land as i'd like to build my own place and think i have more chance of adding value by picking up a cheap block and being creative with what i put on it.

cheers!

If it's in a vacant land subdivision then the $/sqm works pretty well. Corner blocks will command a premium as do those next to/near parklands.

In normal areas you can look at comparable blocks to try and work out value for money. In some areas the house on top of it can basically be for free so don't discount looking at ones where you can demolish the house and build you own.

Price goes up for:
- flat blocks (they need less earthworks for building on)
- regular shape
- quieter street
- amenities (but not too close)

Price goes down for
- sewerage easement
- busy roads
- odd shapes
- neighbours from hell
- massive overhead power pylons

 

[bateman84]

thanks for the replies guys, lots of useful info. the parking lot block in particular is not an estate but someone that has subdivided off the back of their commercial block (and i assume had it rezoned - need to obviously check this bit). no i agree, i woudn't be negotiating with (or even dealing with) large developers. i'm actually not convinced its the best time for me to get into the market but realise theres some poor sentiment out there and looking to catch a desperate vendor.

i'm on the hunt for big blocks in nice areas where the house comes for free and can be rented in the short term before knock down and build PPOR. i realise these are hard to come by but i'm hapy to wait

i don't much like that quote "no such thing as cheap land" at the moment but i know it to be true haha

thanks for your help.