selling your house to a developer

[jsoe]

I can't help but wonder how good some developers are. They know means and ways to snatch up prime properties that are not even on the market, and BOOM! they build up these big fat brand new blocks of units.

I was driving down the street the other day in a leafy quiet residential area when I saw a big fat DA notice on a row of houses along one side! Apparently this developer bought out 4 big houses in a row to build 52 units!

How do these developers approach these owners and get them to sell in one go? Has anyone been appraoched by a developer? What are their secrets?

 

[jsoe]

anyone?
Is it a worthwhile investment to buy a house with substantial land and appropriate zoning, with the purpose of selling it to a developer down the track? I'm looking for my 1st IP and would very much like to know which strategy is the best to get ahead in terms of CG wise.

 

[mary&mat]

Hi jsoe,

I'd say the developers do their research & I assume they'd actively approach these people, especially to get 4 homes in a row!

I'm also assuming they make good unconditional offers on the properties so the owners are tempted. eg If someone came & offerred me a huge price for my home now, even though i have no thoughts about selling, I'd definately consider it.

(Another assumption): If I knew 2 or 3 houses on one side of me were selling & a big unit development was going up, I wouldn't want to live there anymore & would possibly also consider selling once the developer came knocking.

Just my 2c.

I think it's risky to buy an IP with the intention of hoping a developer will come knocking. I'd look at whether it was a good property in & of itself. If a developer came one day with an offer, that would just be another option for me.

Having said that, I believe some people buy older homes on large blocks, rent them out & probably do have the intention of selling or redeveloping them one day.

For a 1st IP, if I had little experience with developments under my belt, I'd just be looking at places that fitted my criteria for solid CG in the present eg within 10kms of cbd, close to schools, parks, water, freeways, not on a main rd etc etc (these are just some of my own criteria, yours may differ).

Regards,
M&M

 

[pennyk]

we nearly sold our first PPOR to a developer but ended up selling to a neighbour instead.
The neighbour initiated the discussion about joining together and selling in a line. We lived on a moderately busy road. We then independently approached RE agents, who have contacts with developers, to get an idea of what we could get. In the end, the neighbour who initiated the contact decided he didn't want to sell, and because we were keen to move ahead, he decided to buy us out. 10 years later, he still hasnt developed.
There are some fairly easy sums that a RE agent/ developer can do to determine how many dwellings can be built on the land. So, they were able to give us a very quick idea of what the pitfalls/ rewards are.
The challenges are that they will often want a very long settlement, and settlement may be dependent upon them being successful with their DA.

I think its always good to look at development opportunities, land size etc but most already have that potential already priced into them, so they are not necessarily bargains. I would also suggest applying for the DA yourself, rather than just having a developer come and buy the land from you. The feedback from my friends who do developments is that this stage is where the bulk of the profit is to be found.

 

[lizzie]

our last two sales never made it onto the open market - the real estate agent has a listing of genuine, cash ready buyers on their books.

he just let them know the property was coming up for sale and let them fight it out amongst themselves.

we have been more than happy with the end price both times.

 

[jsoe]

thanks

thanks for all the replies.
Yes I agree with you all. I mean if I got an offer from the developer for double the price of what my house was worth, I'd be tempted to sell or consider selling too.

Has anyone had an experince of getting an offer from the developer? Do they usually double the today's house price?

 

[Brett IP]

The offers could come in any sort of amount, not necessarily double.

I know a guy here at work bought a small unit, 1 of 8 in the complex, here on the gold coast for just over $100k. 2 years later developers wanted to buy all of the units.

He held off and held off and being the second last to sell to them eventually got nearly $400k for it. How damn lucky is that, they then knocked it down and built a highrise. Thats his PPOR paid off for good, just like that!

 

[ldriver]

do you mean a large scale development rather than a small unit development?

If its a small development and inner suburbs of Melb, no, the money offered isn't double or that much above market- land banking isn't cheap.

A bit further out, but not sure of the price effect, but i know of blocks that were essentially farm land that were held for a very long time by families (15 yrs +) and then onsold to developers. Melb moved eastwards and caught up with them.