To subdivide or not to subdivide - that is the question

[Shaz331]

hi all
just looking for some general feedback

in the process of settling on a house in the fair city of wanneroo (WA)

the land is 1100sqm approx,
zoned R20 (need 900sqm to subdivide)
Existing house can be retained with minor modification

now wanneroo have been in the planning stages for re-zoning for 5+ years... and the land may be re-zoned to R40 .... at some stage.....maybe during my lifetime... but who can say for sure as perth moves so slowly!!!

if (and its a big if) rezoned we could potenially build 4-5 villas on the site

so..... what would you do???

1) subdivide now (and kick yourself later for not holding off longer)
2) wait for rezoning.....and wait...and wait.. and wait..... until the city finally decide what they are going to do?

so is the metaphorical 'bird in the hand worth 2 in the bush'?

 

[D.T.]

How does it stack up as an investment (cash flow / growth prospects) if kept as is for another 5 yrs?

 

[Shaz331]

as is will be slightly negatively geared - costing me about $70-90 per week to hold and rent existing house

'people' say that i shouldnt have bought in wanneroo - as has never been a great area.... but i believe that wanneroo is still undervalued and underdeveloped... as such i can see growth being a steady 4-5% p/a unless perth really goes to crap (the naysayers all say we're headed for a crash... but the've been saying that for 4 years and still no signs)

running my figures i think i can conservatively say that subdividing and building a 4x2 now would make $100 - 120k

there are no comparable 4 unit /5 unit sites in wanneroo - they are mostly single dwellings on 600-700sq blocks - so would have to look at westminster or balga for comparison? which are much rougher neighbourhoods

 

[Shaz331]

also - if i subdivide now - within 12 months both properties together would be positively geared to a tune of about $4k p/a

not alot - but we are borrowing 100% for this property on IO
using an line of credit (equity release) secured against PPOR for the deposit

and i should mention that this is my first foray into property investing and pretty nervous!

 

[Colin Rice]

Get the site surveyed and see if it is possible to build a unit now with the longer term view to slot in another 3 or 4 once rezoning kicks in.

I can point you in the right direction if you want to chat to some advisers who specilaise in this arena?

I live in Wanneroo BTW (the non bogan part ) and can see the potential going forward for the area.

 

[albanga]

there are no comparable 4 unit /5 unit sites in wanneroo - they are mostly single dwellings on 600-700sq blocks - so would have to look at westminster or balga for comparison? which are much rougher neighbourhoods

Personally this statement to me poses a big concern. It would appear residents of Wanneroo (Im from Melbourne so not sure where this is) live in this area for the currently affordable large blocks and there is not much development?

I just took a quick squizz on realestate and all the houses for sale are nice homes on large blocks. The only 2 bedders seem to be old shacks of some sort?

So if you went ahead, even now, is there even a market for small subdivided 2 bedroom townhouses in Wanneroo? I think you really need to perform due dilligence on the market and see if its even what they want right now. If not you may find you complete your development and are stuck holding a number of properties.

Also what is the demographic? If you considered developing to hold then 2 bedroom homes are not suitable for families. I am guessing given the large blocks it is a family orientated area?

 

[Shaz331]

Theres currently limited choice in Wanneroo to have a smaller house - its an older suburb and there are big plans underway to re-zone vast areas all over the northern corridor... lots of infill....mainly surrounding public transportation links and shopping areas
my property backs onto the rezoning area and the previous owner approached the council about having theirs included in the re-zoning (to which they said they would consider it... but this is by no means a given!)

theres definately a market for a 4x2 on 550sq (many being developed a few roads over in the newer area.... but who wants to live in a neighbourhood where every house is the same.. on the same size block,,, all in a row and with no character? - not me!)

if i had the chance to build 4/5 townhouses - they would all be a minimum 3 x2 (possibly even 4x2) with a small courtyard - luckily we are only a stones throw from a big park.
so would still be family friendly

 

[Shaz331]

Get the site surveyed and see if it is possible to build a unit now with the longer term view to slot in another 3 or 4 once rezoning kicks in.

I can point you in the right direction if you want to chat to some advisers who specilaise in this arena?

I live in Wanneroo BTW (the non bogan part ) and can see the potential going forward for the area.

that sounds like a good idea.... can you recomend a good local QS?

 

[westminster]

Do you want to hold all or sell?

I would consider.......
Subdivide now and on the new 450sqm section build a small 3 x 2 and a 2 x 2 granny flat
HOWEVER make it so that the granny flat is independant and when zoning goes through then you could put it on it's own title and that block becomes a duplex.
Then the original block might also be a duplex block and you can consider what you want to do with that, leave or demolish and build 2-3 depending on the zoning

 

[Shaz331]

humm - sounds like a viable plan westminster!
planning to hold and rent out long term

will look into the granny flat idea for sure

 

[Colin Rice]

Do you want to hold all or sell?

I would consider.......
Subdivide now and on the new 450sqm section build a small 3 x 2 and a 2 x 2 granny flat
HOWEVER make it so that the granny flat is independant and when zoning goes through then you could put it on it's own title and that block becomes a duplex.
Then the original block might also be a duplex block and you can consider what you want to do with that, leave or demolish and build 2-3 depending on the zoning

+1 for that idea.

 

[Colin Rice]

that sounds like a good idea.... can you recomend a good local QS?

Will PM you.

 

[Shaz331]

i know nothing about granny flats..... can you have:

1) seperate carport
2) seperate driveay
3) seperate water / power meters
4) can you erect a fence between main and flat for privacy?

and what would the rental be for a small 3x2 house and a 2x1 granny flat compared to $550 pw for a 4x2 house?

 

[Colin Rice]

yes to all of the above.

more doors equal more yield.

$450/week 3 x 2 + $300/week 2 x 1 = $750/week

Run the above figures by a local PM for confirmation.

 

[westminster]

i know nothing about granny flats..... can you have:

1) seperate carport
2) seperate driveay
3) seperate water / power meters
4) can you erect a fence between main and flat for privacy?

and what would the rental be for a small 3x2 house and a 2x1 granny flat compared to $550 pw for a 4x2 house?

Yes to all. It's just a little house.

Building a 3 x 2 and a 2 x 1 or 2 x 2 granny flat at the same time will cost around $300-330k turnkey for both.

Imagine you are building a duplex behind each other but the rear duplex is just smaller.

Forward looking strategy you need to think about the possibility of the driveway you install now for the 'duplex' being also used by the other side later on so placement is key. So it might go down the centre of the block.

 

[westminster]

PS if you had cash enough now you could bulldoze the lot and double that idea now to get 4 straight away.

Put a driveway up the middle of the block and one each side put 1 house and 1 granny flat.

If you really wanted to you leave a 200sqm 'block' vacant for a future 5th. Just use it as garden for now.

 

[Shaz331]

Will PM you.

that would be great - thanks Colin

Yes to all. It's just a little house.

Building a 3 x 2 and a 2 x 1 or 2 x 2 granny flat at the same time will cost around $300-330k turnkey for both.

Imagine you are building a duplex behind each other but the rear duplex is just smaller.

Forward looking strategy you need to think about the possibility of the driveway you install now for the 'duplex' being also used by the other side later on so placement is key. So it might go down the centre of the block

.

i can sense many hours of research in front of me -- looking a duplex / granny flat designs / driveways /WAPC codes etc

when you say $300-330 turnkey i'm assuming you're not including subdivision costs / driveway / fencing and headworks?

P.s - thanks for all the great advice guys - it is very much appreciated