Home prices compared to a year ago

Discussion in 'Property Market Economics' started by paguatao, 14th Jun, 2015.

  1. bwendo

    bwendo Off the Plan Investor

    Joined:
    3rd Feb, 2010
    Messages:
    8
    Location:
    Merewether, NSW
    Is really good to see such movements in the last 12 months and still seeing people getting in and finding good buying.
    We still keep our eyes open for deceased estates, distressed sellers and and large blocks that can have multiple units - they are the honey pots that have worked best for us.
     
  2. Kent Cliffe

    Kent Cliffe Momentum Wealth

    Joined:
    14th Jan, 2011
    Messages:
    249
    Location:
    Perth, WA
    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.