Is this worth the hassle?

[skater]

I have come upon a property in a regional area that I am very happy with so far. It appears to be in reasonable condition and has a great yield, however, when I spoke to the Real Estate Agent I found out that it was built too close to the front boundary. Apparently I need a Building Certificate to guarantee that I won't get a demolition order from Council. The problem with this is that a Building Certificate is only valid for seven years, and after that there is no guarantee that they will renew it (although I have had a verbal from the Council that they probably would just leave the property there now that it has been built). This property is about 40 years old.

Is this worth the hassle knowing that if I do have to demolish it and rebuild I would be paying a premium as the property is more expensive that just land content.

Thanks

 

[skater]

I forgot to add - How much of a negative will this have on the resale value if I wish to sell at a later date?

 

[BV]

Skater,

You haven't told us what regional area its in.
Is the population there steady or increasing?

I would stay clear of a problematic IP unless its a bargain and you see good returns and/or there is potential for future development.

What you see as being a problem now
a future buyer will also see when/if you want to sell it one day.
Remember that you are probably buying in a hot/warm market
with not many properties for sale and you will be probably paying high price for it.

If one day you want to sell it during a period when there are many FOR SALE signs about then none will be touching your place
unless you are prepared to sell it at a considerably lower price than all the others.

 

[bubbleroo]

Hi Skater,

I don't have the answers but just wanted to know what do you mean by 'close to the front boundary' ? How close ?

For that age i would thought the council wouldn't bother you now if they haven't bothered about it before.

bubbles

 

[Andrew]

Can you use this as a bargaining point to get a cheaper price on the property? If the property
needs restumping anyway it might not cost too much extra to have it moved a short distance
back from the front boundary.

andy

 

[skater]

Hi,

The area has a population of over 10000. This is a stable figure, population has changed little over the last 10 years. This property has a yield of approx 15%.

Cheers

 

[Peter 14.7]

Hi Skater

Having some expertise in this area what I would do (as the deal looks great) is define the problem.

It is either :

1. Real problem (rare for a 40 year old property but possible)
2. Potential problem (no real but too hard for locals to care)
3. Urban myth (usually old problem now gone)

Firstly

1. Get a commitment from the seller to hold the property (something in writing) so you may not be gazumped if the below work bears fruit. Small town = people talk.

2. Get a meeting with Council Planning AND Engineering officer and find out the real problem. Casually mention your option/hold whatever but give them all the detail and plans. Document the meeting and get Council response in writing if favorable. (Most Regional Councils are happy to help). Ask Council did they approve dealing; ask to view plans and approvals on file. Review before meeting so you don’t waste their time.

3. Get a surveyor/planner review your notes and provide opinion if out of your depth.

4. Take to solicitor if necessary

In short you need to know the problem?!?!

If it is simply being too close (say 5m instead of 9m] but was checked off by Council they would be very brave to put a demolition order on you. If it is illegal extension but let go (blind eye) then you are taking a risk if the neighbors complain.

To me being 40 years it sounds like a potential road widening or underground piping that would affect location, so it is option 2, a potential problem.

On road widening you may need to see RTA for their position and likihood of proceeding the near term. A lot of plans never come about but people avoid the blocks in an irrational fear of the risk. Example I owned IP in Coffs with the future pacific hwy behind it. Was set aside in the 1950's and still waiting with little to no chance of it happening now in present situation. Land still there, we enjoyed kangaroos in the back paddock.

If pipe work, modern technique allow option to encase or tunnel with $$$.

So find out the problem and check back in.

Peter 147

 

[Bank]

Hi Skater

My PPOR has the garage built about 40 years ago on Council land by up to 4 inches.
When I enquired at council if this could be a problem they said no.
But if I demolised it, the new structure would have to be where ever the current laws specified it to be built.
.

 

[skater]

Update on Property

Have just come back from a couple of days in the area.

Spent almost 1/2 a day at council picking their brains as to the possibilities of this property. Turns out that they really don't care about the position on the block. Nothing was monitored at all at the time it was built. It appears it was built so close to the front to allow the building of more at the back at a later time.

It has heaps of side access and may be able to subdivide the back half off although it will need a survey to get the OK as it is in a 100 year flood zone and I need to find out maximum depth on the block. If under 1.5m then it is fine. It is highset on piers of about 2.5m above ground level. Council is keen to assist any kind of development. Located in the older area which is considered the best part of town. Old houses in good condition sell between $185 - $300K in this area.

Sweetheart deal as it has no signage and the Realestate Agent doesn't have it in the window or on the internet (when they get a good deal they will hand pick who they tell about it). It needs quite a bit of work, however most of it is just cosmetic.

Small block of 4 X 1br flats. Purchase price is under $150K and when reno is complete it will yield and extra $10 - $15 per flat.