Two houses on four acres

[ferretter]

Hi All,

I have the opportunity to purchase a property in the Perth hills for $450,000.
As stated, it's on 4 acres, zoned Rural Landscape Living, cleared with two houses in good condition - both 3x1, both 1960's. I expect to get around $420 per week in rent.

Though currently not subdivisable, I foresee that in the next ten or so years it possibly could be - it's walking distance to a major high/primary school.

My issue is this, the property is appealing, but the loan would push my loan to value ratio up, so that for the next few years I would be unable to purchase anything else. Not to mention that I would be strapped for cash as well.

Loan senario - $475,000 @ 6.59%, fixed for five years IO, repayments of $2600 per mth. I have two other rental properties that would cover the remainder of the repayments.

Has anyone been in a similar position?

Thanks
Ferretter

 

[lizzie]

have you talked to council in depth regarding subdivison? i ask this as councils seem to work with a strange method of ... declaring land is not subdivisable but you can build a second house on it - then - once the second house has been built suddenly it can be subdivided.

sorry if that sounds a bit odd - but it is the scenario i have come up with from council again and again. we have done three subdivisions of two houses on one block.

 

[ferretter]

Hi Lizzie,

I have only briefly spoken with the council. Apparently there is a new town planning scheme expected within the next 2 (maybe???) years.

Thank you for mentioning what has occured to you, I shall definately keep that in mind when I speak to the Planning Dept.

If I do go ahead I realise I may not be able to take advantage of any other opportunities that may arise. This is the hardest part to swallow, actually not being able to invest if a great deal comes along.

I visualize more head scratching, number crunching and chats with the council before making a final decision.

Thanks again
Ferretter

 

[markpatric]

You might be considering this at the wrong time judging by the perth market and the rest of the market.
Given your position it`s prime for putting yourself under the hammer for a few years....and for what?.
I`d say if you were going to sell your ppor and move into it and renovate etc it is a different story but other than that right now I don`t see the great attraction.

 

[Ausprop]

the gross yield is not too bad and as cap growth picks up over the next year or so (particularly the hills region which is experiencing excellent growth) your LVR will drop anyway. Given that it has potential for subdivision I think it sounds like something worth investigating further.

 

[lizzie]

go down to council and talk to one of the planning officers. what is being looked at in the new planning scheme? if, in two years, the block can be subdivided into 4x1 acre lifestyle blocks then it could be a good buy (depending on what similar is selling for as i don't know the area).

another alternative is to see how many houses you can put on without subdividing (but place them for easy subdivision) and hold them all until new planning comes thru.

talk to council - they don't bite, honest

 

[ferretter]

Hi again,

Thanks for your responses.

I have been sitting back and watching the market continue to grow and grow here in Perth - I though this run would stop 12 mths ago! True, it may not be the right time, so I will consider what I believe will happen in the next few years before I sign.

I'll speak to a planner next week and see what else I can find out.

Ta
Ferretter

 

[monoply]

Guess you just have to work out the probabilities, and what the worst case senario is. For example, what are the chances that you wont be able to subdivide it, and would you still be happy with it?

That said, you should be able to subdivide it at some stage. 10 yrs is a fairly long time though.