Thanks Wylie. So many options.
Happy to help by putting forward my opinion.
Off subject. How is one supposed to get ahead? I couldn’t get that kind of funding. The bank wouldn’t lend it to me based on my income.
Do you mean the bank would not lend to you to do the development?
Westpac has pre approved me 220k based on a %20 deposit. I have 20k maybe 30K in my existing property which isn’t even 20% of 220K ANZ has the deposit based on equity covered as to avoid cross-colaterization.
I might be having a blond day but if you are pre-approved to $220K doesn't this allow you to buy the house next door, at around $200K maximum?
Even if I did get the land for 160K the deposit required by the bank will still be insufficient and then that is probably the max I could actually afford to hold cutting right down my living expenses to make the payments and we haven’t even thought about building on it yet.
If you can get the place next door at what you consider to be market value (or a little less) then as long as you can hold both properties, it will not matter if you don't develop the blocks for years. The double block we are holding is similar. We were in no position at the time we bought the second block to borrow maybe up to another million to develop the back yards between the existing houses, but one day.......
That was three and a half years ago, and only now we are looking, very loosely, at rearranging things, selling one place in order to free up capital to be in a position to do the development. Slowly..... slowly......
In fact, it is only because the half house we will be selling will be going into a family trust, so will not really be losing the future capital gain. Otherwise, we would be selling it now.
For those three and a half years, we have been fairly heavily negatively geared due to the purchase price (high price, ugly house, great potential) and the increasing interest rates. Just now, we are neutrally geared on our portfolio.
That last purchase really (on paper) was not the best buy for us, but we knew that, and went ahead anyway. We are very glad we did, but we had to hold on, while throwing our own money into the loans to supplement the rent (although that also is not new to us, nor something that concerns us, as the capital gains have been substantial).
Our "worse case" scenario with this double block has always been that the council can approve, without any threat of neighbours being allowed to object, splitting the two blocks into three, and giving us an "almost free" block of land in the middle to build on, or to sell to reduce the loans if they became too difficult to hold.