Hi Kent, at over 500k can you provide further insight into how the figures might work for such a site development wise?
Cheers!
Hi Perthnoob,
This client is looking at holding the site for 5 years before considering redevelopment, the reasoning behind the investment purchase was:
- High land component value of 85%+ of the purchase price.
- MW Research suggests the area to have growing future demand, combined with limited supply.
- Low entry price point for comparable sized blocks of the same zoning
In a hypothetical scenario (based on the client holding and retaining dwelling with modifications), the numbers could look like the following:
End Values
Land $275k - $295k
Dwelling: $380k - $420k.
Total: $655k - $715k
Costs
Purchase Costs: $40k
Renovation Costs: $40k
Subdivision Costs: $35k
Land: $512k
Total: $627k
Equity generated: $28k - $88k
These numbers have been rounded for simplicity and I have removed holding costs, but there would be a 3 - 4 month window of vacancy if/when modifications are done to the existing dwelling. Note there are no allowances for selling/transaction cost. If the deal was to sell, I'd me more deal focused rather than location focused for capital growth.
