Nextdoor - sell together or buy/develop/sell?

[buckerooni]

Hi All,

(have seen the recent thread on a similar topic - didn't want to threadjack!)

Background: purchased house in 2010 as IP with a view to PPOR. Made it PPOR in July, the missus' not entirely happy with the area so looking at ways to allow us to sell up & buy elsewhere without financially crippling ourselves. Our property (professionally) valued 2 months ago at $670, owing about 55%. Combined annual income due to the missus back studying is around 140K (pre tax). Just sold our only IP to reduce debt on PPOR.

Testing the water with the neighbour yesterday and mentioned selling in the not too distant future which tweaked my interest - selling together. Looking at the new city of moreland planning we are 'general residential zone' of 2 storeys. The idea is to make enough money to buy an 800K house with a similar mortage (or less). Land size for each is around 375sqm.

I see some options:
1. sell together (easiest, least profit)
2. buy next door, then develop/sell. (hardest, most profit, finance will be a challenge, high effort, large first project and therefore risky)
3. buy next door, sell both (2nd easiest, incur stamp duty of purchase so control of selling better but less profit potentially)

I really like option 2 for the creativity and potential profit. I have close friends who are tradies/run small reno companies to tap into. Looking at an old thread '700sqm is do-able in Moreland/Hume for 3 units' is promising.

Before I get too far down the track can you offer insight into the key issues/concerns I should consider before pursuing any of them? If there's other options to achieve my goal I'd also be interested.

Very broad, but before I bog into the detail some guidance/enlightenment would be appreciated!

Thanks!

 

[Scott No Mates]

Does offering two blocks provide the purchaser the opportunity to create more lots than if you only have one block? ie is each block going to yield 2 lots but together you can get 5-6 or no difference?

 

[Paul@PFI]

If you acquire from the neighbour it could mean that future improved value is not a capital gain. The acquisition becomes trading stock. Hard to argue your intent is not to make a profit.

If you sell the neighbour it may mean you realise a CGT profit. Not subject to MR exemption however.

A small bit of tax planning would be smart. You both may find selling to a developer is a better option In Epping NSW a collective of around 10 homesites were recently offered to a major developer by one enterprising owner. He negotiated on behalf of all his neighbours to sell their homes for approx. 40% more than value if sold individually. Developer paid way over odds and council approved it easily since no affected neighbours would remain.

 

[MTR]

Hi All,

(have seen the recent thread on a similar topic - didn't want to threadjack!)

Background: purchased house in 2010 as IP with a view to PPOR. Made it PPOR in July, the missus' not entirely happy with the area so looking at ways to allow us to sell up & buy elsewhere without financially crippling ourselves. Our property (professionally) valued 2 months ago at $670, owing about 55%. Combined annual income due to the missus back studying is around 140K (pre tax). Just sold our only IP to reduce debt on PPOR.

Testing the water with the neighbour yesterday and mentioned selling in the not too distant future which tweaked my interest - selling together. Looking at the new city of moreland planning we are 'general residential zone' of 2 storeys. The idea is to make enough money to buy an 800K house with a similar mortage (or less). Land size for each is around 375sqm.

I see some options:
1. sell together (easiest, least profit)
2. buy next door, then develop/sell. (hardest, most profit, finance will be a challenge, high effort, large first project and therefore risky)
3. buy next door, sell both (2nd easiest, incur stamp duty of purchase so control of selling better but less profit potentially)

I really like option 2 for the creativity and potential profit. I have close friends who are tradies/run small reno companies to tap into. Looking at an old thread '700sqm is do-able in Moreland/Hume for 3 units' is promising.

Before I get too far down the track can you offer insight into the key issues/concerns I should consider before pursuing any of them? If there's other options to achieve my goal I'd also be interested.

Very broad, but before I bog into the detail some guidance/enlightenment would be appreciated!

Thanks!

What about another option, which can add considerable value, less risk and little/no cash

Put together plans and permits (DA) and on sell to a builder.

I did this is Melb market some time ago now and I know developers who use this strategy to maximise returns.

This strategy will only work if there is demand for this and of course profitable for a builder. First thing is to find out how many units/villas you can fit on the block and the end values.

Cheers
MTR

 

[stumpie]

What about another option, which can add considerable value, less risk and little/no cash

Put together plans and permits (DA) and on sell to a builder.

I did this is Melb market some time ago now and I know developers who use this strategy to maximise returns.

This strategy will only work if there is demand for this and of course profitable for a builder. First thing is to find out how many units/villas you can fit on the block and the end values.

Cheers
MTR

hi MTR

what is the general margin one would make when selling a site with DA approval?

 

[MTR]

I suppose its dependent on a number of things and I am not an expert in this area, if you are flipping and not in a position to build, or if you just want to turn over stock quickly and there is enough fat in it, this is where this strategy can be brilliant one.

If I was to build these 8 units (DA I on sold) I could be sitting around for 2 years for completion of build and the market could have turned. The builder who purchased my DA got stuck with the stock because that is exactly what happed, Melb market went pear shaped while he was building.

I think this strategy works in Melb dependent on the area etc, Perth market I don't think as well, perhaps I am wrong but I don't think builders will pay a premium for DA in Perth.

Here are my basic numbers, this was about 4 years ago now DA 8 unit site, purchase price $597K, sold to builder 12 months later for $903K, did not hit the market, cost me $20K for plans and permits.

But if I made $100K in 12 months for this, I would have been pretty happy, easy money, I did no work for this, other than find/secure the development site and employ an architect to progress ie drawings and liaise with council.

My current site in Melb has plans and permits for 4 townhouses, it has just been rezoned for higher density so could go 6 townhouses on this site and put together a DA, however I am going to go with building 4, only because I already have approval and will turn them over quicker I believe.

CHeers
MTR

 

[stumpie]

Here are my basic numbers, this was about 4 years ago now DA 8 unit site, purchase price $597K, sold to builder 12 months later for $903K, did not hit the market, cost me $20K for plans and permits.

Thanks for the info MTR. You made one hell of a margin on that deal, well done and kudos to you.