Realising intrinsic value

[jimmy]

Hi everyone,

My house in Brisbane sits over two blocks. Going off recent sales in the street, the current bank val (which is pretty much the price paid three years ago) is only just less than base land value. The house is a Qlder that has been built in underneath, costing the previous owners over $300k (they did a very good job). Obviously they overcapitalised but the house still has significant intrinsic value. Does anyone have any suggestions how to get this value reflected in the bank property valuations?

New builds on single blocks are selling for significantly more than our bank val.

Thanks a lot!

 

[Aaron_C]

Split your property into two blocks with subdivision?

 

[jimmy]

Thanks Aaron,

It is actually already subdivided. Basically the house sits over the two blocks. So no need for subdivision costs. Only problem is that the hosue is too wide to sit on a single block so would have to be knocked down. And as I was saying, there is significant intrinsic value in the house. It is a Qlder that has been well renovated.

Are there any options to create value beyond just letting it depreciate over time and then eventually knocking it down and building units or selling off the two blocks?

Ideally would like to see the bank value it at close to the sum of the parts (land value and house replacement cost). Could then use equity for investment.

 

[Aaron_C]

Perhaps modify the subdivision (if possible) to create one small block (emptY) and one large block?

 

[Kristine..]

Hi Jimmy

In Victoria, we are able to realign the internal boundaries up to 10% of the area of the land without (usually) requiring planning permits by having the application dealt with by Council officers acting within delegated authority at the planning department stage

If all you need to do is to realign the internal boundaries so that the house is on one block and the other is now vacant land, then in theory the remaining land will have its own value. Usually, and somewhat quirkily, the remaining house and land value does not change much from the previous house and land value despite the reduction in land size associated with the house

If you decide to explore this option, seek the counsel of the council officers from the very beginning.

Don't allow the realignment of the boundaries to result in some strange or misshaped block. If you ask the council staff for their suggestions, and provided that the topography is suitable - eg no gullies - then even if the swimming pool or tennis court end up on the vacant land at least the house will be on it's own block

Apart from survey, permit and lodgement fees this should not be an overly expensive undertaking. Councils and other providers may still require a Contribution towards Open Space etc but if this is taken as a realignment, rather than as a Subdivision, you may be 'forgiven' these costs

Back in 2002 my Contributions came to more than $10,000 for a dual occupancy, so it is certainly in your interests if the allowable realignment would do the trick!

Hope this helps
Kristine

 

[Rolf Latham]

Typically a brissie property will be an 810 parent block with 2 405s underlying, and the house straddles the divide.

The money you paid for it is the value of that combination as it stands, plus any cap gain or loss

Potential value or value of highest use is hard to get out a valuer at the best of times, and can actually work against you in some instances.

Once you have approval to move things around and have it structured so that one of the 405s hold one home and the other is clear and vacant, you can likely get a target on completion val

ta
rolf

 

[jimmy]

Close Rolf, actually a little over 900. Still 20 wide along the front but deeper I think. House is now on a slab and would be almost 15m wide so can't really see a way of moving it onto one of the blocks. So the only option would be to knock it down eventually to use the blocks separately.

Just wanted to see if there is anything that could be done (reno or otherwise) that would help the houses value to be reflected in the full property value. ie. property value doesn't get close to reflecting the value of the house itself.

 

[Rolf Latham]

what burb ?

ta
rolf

 

[jimmy]

Rolf, it is in Northgate.

Kristine, there might be room up one side to split off a block at the back. This would leave no backyard but is a possibility. Might be something to consider in the future, although I was hoping for a way to get the full value recognised without having to go to such lengths. The other concern is that a battle axe block might not have the same value as the two street-facing blocks.

Todd

 

[Ed Barton]

So the only option would be to knock it down eventually to use the blocks separately.

Being a qld-er presumably it is pre war (built before 1946). if so, you will have a lot of trouble having it knocked down. I've heard termites make lovely pets!

 

[jimmy]

Ed,

Fortunately not in a demolition protection precint. And I may be exaggerating. Probably a more pre-war worker's cottage that has been renovated so that it looks more Qld-ery. In this day and age aren't we calling anything tin and timber a Qlder though?!?

 

[wylie]

Ed,

Fortunately not in a demolition protection precint. And I may be exaggerating. Probably a more pre-war worker's cottage that has been renovated so that it looks more Qld-ery. In this day and age aren't we calling anything tin and timber a Qlder though?!?

Certainly NOT!!!

 

[Ed Barton]

Ed,

Fortunately not in a demolition protection precint. And I may be exaggerating. Probably a more pre-war worker's cottage that has been renovated so that it looks more Qld-ery. In this day and age aren't we calling anything tin and timber a Qlder though?!?

won't you have problems with anything pre war?

 

[DEC]

Slide house to the front and one side and then battleaxe the back block?
Or vice versa

 

[ozsupra]

Banks are traditionally very conservative when it comes to valuations. Despite what you believe the property is worth, in the current climate you will have real difficulties convincing a bank otherwise. They really rely on hard data and if similar houses in the same area are selling (hopefully some are) for X then the bank will see your property worth X minus Y, where Y is their safety margin.

To raise this value you could buy all the houses in the street for a very high price or show the bank that the property on paper has a high value. I don't know if this is an option however your property does sound attactive and could bring in a sizable income as a rental/lease. Do this for a long enough period and you have your data.

 

[Aaron_C]

Banks are traditionally very conservative when it comes to valuations. Despite what you believe the property is worth, in the current climate you will have real difficulties convincing a bank otherwise. They really rely on hard data and if similar houses in the same area are selling (hopefully some are) for X then the bank will see your property worth X minus Y, where Y is their safety margin.

Spoken like it is. It doesn't matter what you think - it's what the valuer thinks because that is who the bank can rely on in case things don't stack up.

 

[knightm]

Banks are traditionally very conservative when it comes to valuations. Despite what you believe the property is worth, in the current climate you will have real difficulties convincing a bank otherwise. They really rely on hard data and if similar houses in the same area are selling (hopefully some are) for X then the bank will see your property worth X minus Y, where Y is their safety margin.

To raise this value you could buy all the houses in the street for a very high price or show the bank that the property on paper has a high value. I don't know if this is an option however your property does sound attactive and could bring in a sizable income as a rental/lease. Do this for a long enough period and you have your data.

too true and brissy has been a hard market to get a great val lately.

 

[Michael A]

Jimmy
Think bigger. Not smaller. What I would do is :
1 Contact your local council ask what the minimum size lot is in your area, and the minimum setback from the fence line.
2 Mathematically work out how much of each neighbours property you would need to be to compliant with the guidelines. Contact the neighbours and offer them 20% more than the land value in your area. The intrinsic value for owner occupiers is in the house not the land, this will help you. Experienced investors know land goes up, capital inprovements go down, thats another storey.
3. Secure this agreement to buy their land with a binding option contract. Call a specialist property lawyer to get this right.
4. Contact a surveyor and engage them to apply for the subdivisions. Based on your option to purchase the extra land.
5. Contact www.forsaleforlease.com.au and advertise your two new lots at 10% less than the cheapest lot in town. Have your solicitor execute contracts save $15,000 in agents commission.( This is a company I own)
6. Contact a sufficicated mortgage broker with access to private equity. Aaron C on this forum should be able to find the $60 k for headworks to create the titles.
On my estimation this would net you over $200k If you need a JV partner I can help make it a reality.
It warrants investigation at the very least.