Mixed feelings here.
We did buy one that was subdividable (double frontage, house on one side) and in fact the subdivision was already approved and the fence built. This had the effect of "stopping the clock" on completing the subdivision, because work on completing had commenced. It also locked in certain levies at the date of the subdivision approval, saving us $10K. The owners just never got around to completing it. - too busy spending their money on the PPOR. We got it for the value of the PPOR only.
Still, there was an opportunity cost. We spent $25K to complete, which was tied up for as year, and in the meantime we could have used that to buy another IP. I am glad we did it because it was relatively easy money, but of course we had holding costs.
On the flip side, we have 3 <600sqm blocks with rentals, and I like those too. By buying small blocks mostly covered by the house with just a manageable garden, we have lower maintenance rentals and we aren't paying a premium on something tenants won't pay extra for.
Since we're buy-and-holders, capital gain is only really of interest to us (a) as a hedge on our position and (b) to the extent that it relates to rent increases over time. That's not to say we don't look for capital gain, but it's a hedging tool and a leading indicator of increasing rental yield, and not an end goal.
Also, the gains don't seem to be exponential according to land size here anyway. It's not like the price gap between 600sqm and 1000sqm is widening. It's there, but the gains are like parallel lines on an upward trajectory. Since in our part of the world, a 3 bedroom is a 3 bedroom for rental purposes, that means we can pay a premium for extra land that isn't income producing, or put it towards another income producing house.
That's not to say we wouldn't subdivide again. It was a profitable experience. But we aren't actively looking for them. (I have, however, noted that our new PPOR would lend itself nicely to a battleaxe block).
I do, however, keep a close eye on granny flat potential. Again, this relates to the buy and hold thing. I suspect you'll usually only break even on a granny flat in capital gains terms, but the increase in yield is huge.
We did buy one that was subdividable (double frontage, house on one side) and in fact the subdivision was already approved and the fence built. This had the effect of "stopping the clock" on completing the subdivision, because work on completing had commenced. It also locked in certain levies at the date of the subdivision approval, saving us $10K. The owners just never got around to completing it. - too busy spending their money on the PPOR. We got it for the value of the PPOR only.
Still, there was an opportunity cost. We spent $25K to complete, which was tied up for as year, and in the meantime we could have used that to buy another IP. I am glad we did it because it was relatively easy money, but of course we had holding costs.
On the flip side, we have 3 <600sqm blocks with rentals, and I like those too. By buying small blocks mostly covered by the house with just a manageable garden, we have lower maintenance rentals and we aren't paying a premium on something tenants won't pay extra for.
Since we're buy-and-holders, capital gain is only really of interest to us (a) as a hedge on our position and (b) to the extent that it relates to rent increases over time. That's not to say we don't look for capital gain, but it's a hedging tool and a leading indicator of increasing rental yield, and not an end goal.
Also, the gains don't seem to be exponential according to land size here anyway. It's not like the price gap between 600sqm and 1000sqm is widening. It's there, but the gains are like parallel lines on an upward trajectory. Since in our part of the world, a 3 bedroom is a 3 bedroom for rental purposes, that means we can pay a premium for extra land that isn't income producing, or put it towards another income producing house.
That's not to say we wouldn't subdivide again. It was a profitable experience. But we aren't actively looking for them. (I have, however, noted that our new PPOR would lend itself nicely to a battleaxe block).
I do, however, keep a close eye on granny flat potential. Again, this relates to the buy and hold thing. I suspect you'll usually only break even on a granny flat in capital gains terms, but the increase in yield is huge.
. Anyway back to crunching numbers for me.
