Re-Zoning

From: Glenn Mott


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A certain suburb I am looking at is currently zoned R 12.5 (1.25 homes per
1000sqm). There is a draft re-zoning current for a particular section of
this suburb that would change the zoning to R 25 (2.5 homes per 1000sqm).
Re-zoning is expected in about 18 months. 3 bedroom homes on 800-900sqm in
this section can be bought for around $120,000. New home blocks of around
400-500sqm can be bought in this suburb for around $50-60,000. Rents for 3
bedroom homes start at around $150\week, which by my reckoning, means each
property bought at $120,000 would cost me around $12 per week at current
interest rates to keep before tax.

The way I see it, my risks are:

Keeping the houses for 18 months only to find there has been a community
revolt against re-zoning and it not going ahead.
The property market taking a downturn (falling values), interest rates
rising and my cashflow taking a big hit

My benefits would be:

Re-zoning goes ahead, properties with lot sizes > 800sqm are now
sub-divisable, all houses that fit this criteria lift in value (by how
much???)
Houses could be rented as-is, but with a special condition that allows
sub-division to occur and a fence to be erected in back yard
Rear blocks could be sold off for around $50,000 after costs.

Would anyone with experience at this care to comment on the viability of
doing this.

Regards

Glenn

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A certain suburb I
am looking at is currently zoned R 12.5 (1.25 homes per 1000sqm). There is a
draft re-zoning current for a particular section of this suburb that would
change the zoning to R 25 (2.5 homes per 1000sqm). Re-zoning is expected in
about 18 months.3 bedroom homes on 800-900sqm in this sectioncan be
bought for around $120,000. New home blocks of around 400-500sqm can be bought
in this suburb for around $50-60,000. Rents for 3 bedroom homes start at around
$150\week, which by my reckoning, means each property bought at $120,000 would
cost me around $12 per week at current interest rates to keep before
tax.

The way I see it,
my risks are:

Keeping the houses
for 18 months only to find there has been a community revolt against re-zoning
and it not going ahead.
The property
market taking a downturn (falling values), interest rates rising and my cashflow
taking a big hit

My benefits would
be:

Re-zoning goes
ahead, properties with lot sizes > 800sqmare now sub-divisable, all
houses that fit this criteria lift in value (by how much???)
Houses could be
rented as-is, but with a special condition that allows sub-division to occur and
a fence to be erected in back yard
Rear blocks could
be sold off for around $50,000 after costs.

Would anyone with
experience at this care to comment on the viability of doing
this.

Regards

Glenn

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