Thoughts on FLOOD zone IP development? Bris...

[kev888]

Hey guys, i've been doing some heavy reading within the forum and learning lots so to all of you... thank you!

Being my 2nd IP, i'm looking for a 1 into 2 split block scenario. Something to renovate and live in for 12 months and in that time subdivide and sell off 2nd piece of land to build equity and then go again.

Now the problem is, within my budget (financial comfort zone), i've narrowed my searches to 2 properties that both reside in the BCC flood map zone. It doesn't matter too much if it flooded in 74/2011 or if its potential creek flooding that is the culprit. My main concern is over the future demand and re-sale of such land and properties. In 2 properties i'm looking at, one was subject to 2011 floods (and its priced accordingly) and the other is only subject to potential creek flooding.

On the one hand i thought that in 5 years time, the negative opinions of the recent floods may subside and values will normalise a little. However in the recent draft BCC city plan, it alludes to higher building requirements for properties in flood map areas. A mate of mine is in BCC town planning and his opinion is quite negative on flood map properties. Reasons: insurance premium hikes imminent, lower resale values, stricter building requirements.

All my estimates in this investment are on the LOW side (for obvious reasons) and its still viable financially.

Should I proceed and face the risk?
or
Save up for a few more months and in that time something may come up thats not in a flood map zone?

 

[RPI]

Hi Kev

Minimum lot sizes are going to reduce dramatically under the new city plan. 600m block with a 15m frontage will become a splitter block.

We are doing loads of 809 splitters at the moment, no flood areas though.

Going through really quickly, most in 5 weeks if straight forward.

I would be a bit iffy about the flood ones, but you might have some luck, need to hear feedback form real estate agents.

Market seems great 2. 1 listed off the plan in Holland Park yesterday at 7am on realestate.com.au. 2x 405m2 blocks no views but in catchment of a good school in quiet street. 1st block offer accepted at asking price of $329k before midday yesterday. other side accepted offer at $329k today by midday today.

Just doing off the plan contract up for a Wynnum 405m2 site now so will see how that goes.

regards

Darryl

 

[Rolf Latham]

a simple decision maker may be how much cash do u have ?

while we have managed to put away duplexes at 90% with water through the "storage area" in 2011, most finance situations wont tolerate a Cat 5 risk on enviro factors

ta
rolf

 

[kev888]

Thanks Rolf. Since my post, i'm leaning a lot more towards standard non flood risk properties. The entry cost is higher but the rewards and 'safety' is higher too.

Darryl, you've got me looking at splitters in mt gravatt now after your scenario there! Any chance i could run a few scenarios past you privately? I understand you work for Pro so ultimately my approvals would go through you anyway!

 

[RPI]

Hi Kev

no worries just email or call me with the details. I love what I do so its no bother at all.

D

 

[Andrew_A]

It's a feasibility question, if the numbers work out and you can find similar blocks that have sold then that helps with the calculation, still difficult with flood blocks to be entirely accurate as you will find it harder to get comparable land only sales, would tend to avoid unless the numbers are compelling and there are plenty of blocks that don't have issues, finding a nice clean site will be worth the extra effort.