Selling off the back half of our block...

[justme28]

Hiya... been a long time since I've been here. Did a google search for some information and remembered this place.

Our home worth roughly $370k sits next to a home for sale through the public trustee. It needs major renovation work and is likely to be demolished.

We have been approached by a developer with a deal build five on the two combined blocks etc etc...

We have roughly worked out that we could be just as well off to just sell off the back of our block to the developer. He said he would rework the figures.

Can anyone offer any words of wisdom? I assume we would incur CGT for the sale of the rear parcel of land.

The developer expects next door to go for $340kish... does that mean he might offer $170k to us? Would we have to do the subdivision or would he?

We could end up with little or no mortgage out of the deal, so just exploring options.

Does anyone have any thoughts? Thanks!

 

[Bushy]

Hi Just,
You might only have to pay for a boundary realignment which is about 3k.
If he can only get 2 on the block next door and he can get 4 with your back half it might be worth more that 170k. Your place might even be worth more than next door if your place is worth an extra 3 sites.

Do you want a house in your back yard if you sell.

What suburb are you talking.

Cheers Bushy

 

[justme28]

Thanks Bushy. I'm in Clovelly Park.

Ideally no, we don't even want to lose the back of the block, but the idea of no mortgage and being able to sell up in the future with a big deposit in an area of our choice is very appealing.

 

[Bushy]

Hi Just,
Have you considered buying next door, you already have a head start on the developer.

We had the opportunity to buy the pop behind us a few years back for 250k and thought it too expensive. Since then rents have risen and it would be cash neutral. Not to mention development scenario, granny flat for the kids in the future etc. If an adjoining property to any of ours ever comes up we will definitely look at it because of its intrinsic value. It will also raise the value of your prop

Cheers Bushy

 

[vincenzo]

I wouldn't sell there, Clovely Park looks like a really good spot with heaps of future potential! It's close to the city, a large reserve, nice beaches not far away, and neither is the airport.

If you sell there now, you'll be kicking yourself for it in about 5 or 10 years. Unless you've got something better planned for the money - but even in this case, i say just use the equity, don't sell!

 

[justme28]

I hear what you are saying completely. Problem is it is need of quite a lot of repairs and money is tight right now, so it probably couldn't be let just yet. Apparently quite a lot of roof problems.

 

[Gools]

Have you been keeping an eye on how much properties are selling for that have had the backs cut off? Don't just assume you would be able to sell in the future once you have split off the back and have more cash in hand. I know you like the appeal of not having a mortgage left but that shouldn't be your single focus. Work out some comparable sales on having the back there or not and what you think prices will do.

You don't want to sell the back off now only to see properties the size yours used to be selling strongly.

Gools

 

[Philip Thomas]

Real Estate Development Options & Opportunities

Look at this opportunity from a financial perspective.

There are a couple of options here & some things to consider

1. Sell outright to a developer for around $370k. Would you make a profit (deduct stamp duty & fees) enough to buy a better property than what you currently have? (has you net worth gone up)

2. Sell ½ lot for around $170k & keeping existing house. What would be the new value of your existing house on ½ the lot? (look for comparable lot sizes & house conditions in your area). Check if the proposed subdivision results in your house becoming a strata lot (can check this with council planers re subdivision lot size & density zoning), Have you increased your net worth???

3. Buy the property next door, rent it out & then do the subdivision your self. Key is supporting the cash flow through the process. Can you support this with your current income + rental income??? Usually you realise maximum value when you subdivide & build rather than subdivide on its own. One option is to subdivide, sell off your existing house, then use the sale to bank roll the build.

Examine the above & work out what will generate maximum net worth for you based on income???

Philip

 

[Rockstar]

The developer expects next door to go for $340kish... does that mean he might offer $170k to us? Would we have to do the subdivision or would he?

We could end up with little or no mortgage out of the deal, so just exploring options.

Does anyone have any thoughts? Thanks!

If next door goes for 340k and they have to demolish then they are paying 350-360 + SD and legals for the block of dirt. And your house on a similar block is only worth 370k? Doesn't make sense unless your house is also old and worn out? I would either be buying next door below market if possible or putting a house in your back yard (strata sub.) if access is possible. However this path requires the right mindset and, of course, has risk (which can be minimised with DD). If a block of dirt is worth 350k then half a block is more likely worth 250k - not half the value IMO.

 

[justme28]

Thank you all for your input. Interesting perspective that our block would be worth more than next door. Our land is equal in size (approx 17m x 43m). The house next door is 3 bedroom, fibro with plastic bricks stuck on it and is in major need of repair. Our house is only 2 bedroom, but has been fully renovated and the yard/shed etc is neat.

I have asked the developer to redo his figures on buying the back of our block and we'll chat once we have that offer.

 

[silversands]

Hi,

Would be interested in hearing what your local R.E's reckon half your block would be worth also; as opposed to your entire property.

Regeards Jo