Sell, keep or develop?

Hi everyone,

I am very glad I found this forum!! And I am hoping that some one can help me here make a decision.

I have a property I have owned sine 1999 so its definetly CGT 50% exempt if I sell as is, its starting to fall apart but is on a decent 805m2 block of land for where it is (melbourne area, mulgrave, near where the VFL was played years ago).

Anyway, some agents are telling me its worth upwards of $550-600K if I sell as is (Ie land only, discounting the house 3br, 1bath house)

Questions are
1. I read with interest another post pointing to the fact that the 50% CGT discount wont apply if i develop the property? is that true??

2. (having no hands on experience in development yet), should I try to split this land and build two units/townhouses on it? Is it worth the headache? I can take time off work (1-2 days a week) to look after this.

3. Or perhaps just get the plans/permits and sell them with the plans?

4. I supoose the alternative is that I should keep it and continue to rent...? If I do thats fine except I think its going to start costing me more and more (rotting supporting posts, over grown garden etc).

Any ideas suggestions will be very much appreciated.

You are probably going to hate me for answering this way, but the first thing which needs to be done is a 3 part feasibility.

1) Obtain market value of what realistically you could sell the block today doing nothing.
2) Obtain market value of what you could realistically sell it for in x period of time with plans approved (including all your holding/planning costs)
3) Obtain market value of what you could sell if for in the future being developed and then add in the cost for planning as well as development.

I have seen many recent feasibilities with people developing blocks and devaluing them, yes you will gross more money on developed property(ies) but the net result can often be similar to point 1 and you don't have to deal with the heartache.

Again, when looking to sell or keep it is a matter of maths. Work out the development costs and figure out the holding costs on this. Estimate the market rents and see if you can afford to do it. If you can’t then the decision has been made, you have to sell. Also, make sure you can get funding to keep the development – because this as well can make the decision for you.

If you can keep, that’s great. Now work out your entry/rebuy costs on selling it and investing again. I find 90% of the time people who do this sum realise it is better to keep the property unless the area is going to decline in value or they want to diversify their portfolio.

There is all other stuff about working out rental yield pre and post development, but I don’t want to make this post too long winded.

The simple steps are find someone you can trust (with no axe to grind) on doing these feasibilities [accountant or some sort of property advisor] or study as much as you can and be very diligent in doing them yourself.