DA, subdividing & selling vacant land

[Alex P Keaton]

Hi

I've decided against doing the single dwelling construction behind the house. I explained why in another thread but mainly because it would be too stressful.

Would it be as stressful to go through the process of DA to subdivide and sell the back lot?

I know it would mean NG the front house for a while and I'd have to be prepared for the holding costs. I'll have another income stream coming in. Another $10 k a year. Plus the sale of my ip.

Buy house with proposed reasoning?
Buy house already with DA approval to subdivide?

With the view to sell the back as vacant land sometime in the future.


Thoughts?

I have a meeting soon with my BA to discuss a suitable strategy for me.

Thanks.

 

[thatbum]

Its going to be hard to find a property where the numbers stack up so its worth your time.

 

[Alex P Keaton]

I forgot to add. I wouldn't undertake this for a few years. Maybe 5 + years time

 

[thatbum]

Well a lot will change in that time. Both with the market and your own personal situation.

So the only useful answer to that question is whether or not that is a decent general strategy - and it is I suppose.

What are you going to do in the years in between? I'd probably be learning as much as I could. Maybe you won't need a BA when the time comes.

 

[boeman]

I am in this situation now, I have land which I will subdivide as I am banking on that at some point it will get rezoned to R40 (in the proprosed Girrawheen area). Realistically I think this is a few years away yet since WAPC and council drag their feet.

Subdividing and selling a back lot is easy, I have been involved in the process a lot through my job. Simply employ a surveying company, pay a fee and they can take care of the rest for you. No real stressful DA or things of that nature, it is pretty straightforward. Make sure you factor in this cost though to anything you are planning.

IMO the best strategy is to retain the rear lot and build on it though. The loan on the build will be positively geared the second it is rented if you do it right since you are only borrowing for a build since you already have the land. Plus you can depreciate the new build. Selling just the land component won't bring you much comparatively. It may help the loan, but you need to factor in that your front property is now worth less also. Like all things though, this is just my opinion and strategy.

 

[thatbum]

Subdividing and selling a back lot is easy, I have been involved in the process a lot through my job.

Yes the actual implementing is easy. The hard part is figuring out whether its worth doing looking at all your other options - such as selling the undivided lot, or the different combinations of retain/build/bulldoze etc.

 

[MTR]

Boeman
Nothing wrong with this strategy if it stacks up.

Also if retaining the front property need to allow carport at the front perhaps $7000-10K?. If the plan is to sell the front property or rear build or both then the elevation on the front property needs to be very attractive to sell rear, otherwise you will have issues.

Also, I believe in these areas its desirable to have all new product, just my opinion which I base on similar scenario to what we see in Balga/Westminster/Nollamara today. Those 3x1 sell very cheaply (I think that's bad English) and not anywhere near as desirable as new product. Something to consider.

Most of Girrawheen is R40 and blocks around 698 sqm, perhaps there will be some very creative options for this market when zoning does come into play.

Is your Girrawheen property double brick or brick veneer?
Something else to consider many of those older houses in Girrawheen/Balga have asbestos product. Effect resale??? my guess is yes.

MTR

 

[boeman]

Boeman
Nothing wrong with this strategy if it stacks up.

Also if retaining the front property need to allow carport at the front perhaps $7000-10K?. If the plan is to sell the front property or rear build or both then the elevation on the front property needs to be very attractive to sell rear, otherwise you will have issues.

Also, I believe in these areas its desirable to have all new product, just my opinion which I base on similar scenario to what we see in Balga/Westminster/Nollamara today. Those 3x1 sell very cheaply (I think that's bad English) and not anywhere near as desirable as new product. Something to consider.

Most of Girrawheen is R40 and blocks around 698 sqm, perhaps there will be some very creative options for this market when zoning does come into play.

Is your Girrawheen property double brick or brick veneer?
Something else to consider many of those older houses in Girrawheen/Balga have asbestos product. Effect resale??? my guess is yes.

MTR

Hi MTR,

My property is actually located in Marangaroo but included in the Girrawheen rezoning due to proximity to the high school. Double brick with carport and on the front RHS of the property. I have 5m clear on the LHS of the carport ready for a driveway (hence the purchase). Rectangular, flat 700m2 block.

I do agree that all new is desirable, but I am lucky in that I work in the building game so the old front house will present as new when the time comes (rendered/stone front elevation, colorbond roof, new kitchen/bathroom, built in robes, paint, carpet, blinds etc). The existing carport will make way for a long single brick garage (the rear part will be an open "store" to cover me for the store required when subdividing). Of course my situation is unique in that I can do a lot of work myself, and the stuff I cannot I get very cheap due to my position in the industry.

But yes, from my number crunching the figures check out. I can build at the rear for $200k finished (build on my own ticket using my employers contract pricing for materials). Total investment will be $650k between front property purchase including renovations ($5k to date, $20k total by the time I am done)and new rear property. I anticipate total value of both properties combined when I do subdivide will be conservatively around $800k. Rear new house will be rented and depreciated, front house will remain my PPOR for now as I used my FHOG/no stamp duty and also didnt pay LMI (saved circa $33k).

Of course as I said, this is all my strategy. I wanted a house to live in that I could capitalise on using my skills, contacts and knowledge of residential building. My goal is to own both homes in Marangaroo outright by the time I am 40 (currently 26). I will then re-evaluate.

 

[Brady]

Of course as I said, this is all my strategy. I wanted a house to live in that I could capitalise on using my skills, contacts and knowledge of residential building. My goal is to own both homes in Marangaroo outright by the time I am 40 (currently 26). I will then re-evaluate.

I would look to re-evulate this stategy once completed. You have the skills and contacts why limit yourself to these two property. Why not repeat?

 

[boeman]

I would look to re-evulate this stategy once completed. You have the skills and contacts why limit yourself to these two property. Why not repeat?

I probably will re-evaluate, but this is just my current strategy since the rezoning is only proposed at this point (could be years before I build) and I am single income for the time being (girlfriend is finishing her masters in sonography and will be able to contribute soon).
On top of this my largest debt will be on my PPoR. I would rather pay this off asap since the interested is a loss, and be at $0 debt with $800k minimum equity to play around with, and still have plenty of working years left to service debt.

After 40 my rough plan is blue chip property, seeing as I work in the luxury home market, I can really capitalise on building large homes at 0% margin. For now though, my two goals are the rear build and paying off the front property.

 

[Kinnon Bell]

APK, I am saying this with no intent to insult you but you can't seem to be able to firm up a strategy and stick to it. Is buying an IP with a view to sub divide in 5 years to best thing for you to do? You may have swapped or decided on several different strategies in that time. And who knows what your own situation will be like then. By the sounds of it, you will be committing yourself to this plan for the next 5 yrs without the ability to buy any other investments. Will the gain by subdividing be that large that it would be worth waiting 5 years for?

If I were you, I would invest in something that has the ability to pay dividends straight away whether it be via CG of CF or both so you get to see the benefit straight away, then leverage off that to buy a another (few?) IPs. Then you can change your mind as you go and not be locked into something.

 

[MTR]

Hi MTR,

My property is actually located in Marangaroo but included in the Girrawheen rezoning due to proximity to the high school. Double brick with carport and on the front RHS of the property. I have 5m clear on the LHS of the carport ready for a driveway (hence the purchase). Rectangular, flat 700m2 block.

I do agree that all new is desirable, but I am lucky in that I work in the building game so the old front house will present as new when the time comes (rendered/stone front elevation, colorbond roof, new kitchen/bathroom, built in robes, paint, carpet, blinds etc). The existing carport will make way for a long single brick garage (the rear part will be an open "store" to cover me for the store required when subdividing). Of course my situation is unique in that I can do a lot of work myself, and the stuff I cannot I get very cheap due to my position in the industry.

But yes, from my number crunching the figures check out. I can build at the rear for $200k finished (build on my own ticket using my employers contract pricing for materials). Total investment will be $650k between front property purchase including renovations ($5k to date, $20k total by the time I am done)and new rear property. I anticipate total value of both properties combined when I do subdivide will be conservatively around $800k. Rear new house will be rented and depreciated, front house will remain my PPOR for now as I used my FHOG/no stamp duty and also didnt pay LMI (saved circa $33k).

Of course as I said, this is all my strategy. I wanted a house to live in that I could capitalise on using my skills, contacts and knowledge of residential building. My goal is to own both homes in Marangaroo outright by the time I am 40 (currently 26). I will then re-evaluate.

Fantastic, you are in a wonderful position here, and great you are in the build game. Can you access any equity now and purchase another?

 

[boeman]

The equity I do have will be used to borrow for the rear build, anything beyond this would be stretching myself too much for the time being. At the moment I have only done paint/carpet/blinds/robes so unsure on what equity I would have anyway. Oh and a handmade pizza oven, but dunno how Propell and the like view that haha.

As I said, once I have that rear build done, I will re-assess and keep aiming for debt free at 40 for another project, or whether to jump right in ASAP.

As it stands I am pretty happy, I think the property was the right purchase at the right price for what I have planned short term. Long term a blue chip build would be ideal.

 

[Barney118]

Without hijacking the thread, I am considering buying a house IP with the view to either subdivide or sell the land off, if you sell the land say 400k does this need to be payed off the IP or can it go towards PPOR? I take you need to own for 12 mths to avoid huge CGT.
Barney

 

[Barney118]

Without hijacking the thread, I am considering buying a house IP with the view to either subdivide or sell the land off, if you sell the land say 400k does this need to be payed off the IP or can it go towards PPOR? I take you need to own for 12 mths to avoid huge CGT.
Barney

I thought someone out there would know the answer here?

 

[HD_ACE]

Without hijacking the thread, I am considering buying a house IP with the view to either subdivide or sell the land off, if you sell the land say 400k does this need to be payed off the IP or can it go towards PPOR? I take you need to own for 12 mths to avoid huge CGT.
Barney

You will need the banks consent to subdivide and get titles. Therefore when its completed both will be valued and the bank will want acceptable lvrs on both blocks.

Because the value of the original house would normally go down after subdivision the bank will want security over the new block with the remainder of the debt secured against it.

Something to this effect. Run it past your broker or lender that you will be using.