Wait, Develop or Granny Flat ??

[jacnblaze]

hi all

Newbie to property investment here.

I have a block of land Zoned R2(a) in Burwood NSW, located near Liverpool road. The property was bought in 2012, is currently tenanted and I?m paying about $8k land tax per year. The land is 1018 sqm with a couple of big trees located near the back fence (possibly native so probably not able to be removed) , the land also has a covenant charge with one of my neighbouring lot, effectively the covenant restricts me from building 15 metres from the street. The block's dimension is approx 16.7m (wide) x 62m (long)

The latest S149(2) certificate says that it is zoned as low density residential, the Burwood zoning map shows that my property is exactly on the border between R3 medium density residential and R2 low density residential.

Initially i've been thinking about building a granny flat as the backyard is big and on level land, Brazen from Granny Approvals had came out and had a look it. He had given me some very good advice about broadening my options and think about what other options there may be (e.g: subdivision, development etc) in addition to the option of building a granny flat. I?m at this deciding stage at the moment.

I've spent only some time reading the forum about property development and I?d really appreciate some advice here about the options below available for me.

(1) keep existing house and build a granny flat, move into GF
(2) keep existing house, build a detached studio, according to SEPP it's apparently possible to build something approx 100sqm, 3br.
(3) Don't build a granny flat or detached studio, apply to subdivide the land, then apply DA to build two semis side by side like my neighbour (2 at back 2 at front, so 4 properties all together) then sell.
(4) Do nothing, wait until my property goes up in value then decide to sell later
(5) Apply to council to rezone the R2 to R3(medium density residential), so that I can build possibly townhouses or units on this land. Then sell with either the DA or develop, build and sell.
(6) Do nothing, wait until my other neighbour to sell (a very elderly single person with sons and daughters living interstate) and buy the neighbouring lot, effectively controlling two pieces of adjacent lots totalling 2090sqm and then apply to council and later somehow develop both lots as high density residential properties

I've attached a google maps view of the land. Thank you for your comments.

 

[labrynth]

Hi

I have gone over your property at Lindsay Street and here are my thoughts.

Seeing as you are renting the house out and probably getting around $750 a week rent you should do something as you are currently just relying on capital growth to make a return. A gross return of around 3% wont get you anywhere quickly.

Firstly you will never get the rezoning. Your street is R2 and only the property on the rear is R1. R1 conflicts with the rest of the street scape so I don't see any grounds to getting a rezoning. Also rezoning involves changing the LEP which is statutory which is a big headache for council with little return.

A granny flat is limited to 60m2. A granny flat isn't the best for your block of land because there is no real separate access and no on site parking. You will have a lot of turnover in tenants in the house and the granny flat causing you to pay letting fees and maintenance cost for damage from moving tenants.

Your neighbours land that has the 4 townhouses is 1500m2+ yours is only 1000m2 and doesn't have the width to accommodate. The highest development you could get on there in terms of residential are duplexes. Seeing as the cost to build a set of duplexes is around $800,000 turnkey you would need to sell the end product for about $1,400,000 to make a profitable return after GST.

I don't see much profitable development potential however I do have a solution that can see your investment work much harder for you.

I propose doing a deal with a child care operator where they come in, pay for the construction of circa $300k to make it compliant and rent the property back from you on a long lease. You could get potentially get a 20-30 place centre on your land which would pay you a reduced rent of about $45,000 net p.a since they are paying for all the construction. The way you would structure this deal is with a 10+5+5 year lease where the rent after the 10 years reverts to market rent. The good thing with child care centres is they pay all the outgoings, rent rises at CPI and have long leases meaning no vacancies. After the 10 years the rent reverts to market and you have a property with a child care centre and a long term operator paying market rent. This is a hassle free investment and you would get a lot of the upside without having to maintain or manage tenants wanting you to fix the blinds/taps/toilets/rattling pipes in walls...

I assume that you are heavily negatively geared, under this scenario your investment would turn almost passive once you include depreciation from the new construction and the increased rent.

If the child care option is something that interests you let me know as I am looking for sites with child care potential in the burwood area. Send me a private message if you want to discuss.

 

[Shahin_Afarin]

How are you going to do a granny flat? there doesn't seem to be any access on either side of the building?

 

[jacnblaze]

Thanks

Thanks for the comments so far. I'm not too keen about the child centre idea but would be very interested to still look at the residential use ideas. It's a bit challenging with so many possible options at hand.

 

[Sesster]

" Seeing as the cost to build a set of duplexes is around $800,000 turnkey"

Shouldn't cost 800k turn key for a duplex.

CB