What do you think ???

Hi all.

Well my second IP is done and dusted now with tenants in.It is a 1000 plus sqm corner block with a 3/4 by 2 and an attached self contained granny flat.

My thoughts are now turning to the 400 sqm avilable on the back of the block. It is currently getting surveyed but there appears to be nothing stopping me building a 3 bed, two bath double garage property on the back.
Cost involved will be
Council
Sewer line incasing
replacement garage
Demolishing of existing old garage
New house
Landscaping

I am still waiting for quotes but i believe i can get out of this for between $200,000 and $230,000. with an expected rent return of $320 to $340.
I have also allowed for a $30 pw drop in existing rents due to smaller yard although i don think it would happen.

So the numbers look ok.Also an identical property 200 meters up the street had the same thing done and they sold the new property for over $340,000.
I intend on holding long term.

From an LVR point of view this should not change things. Infact i think our LVR improves slightly. So from a risk point of view if things go bad after the build for what ever reason. We should have instant equity available to provide buffers. So in a way there is less risk after building.I am still not near my limits in servicing loans. Far from it.

So what are peoples thoughts. would you generally jump straight in and start the new build. Would you sit and wait to see what happens with the economy.

Any thoughts ??
 
Infact i think our LVR improves slightly. So from a risk point of view if things go bad after the build for what ever reason. We should have instant equity available to provide buffers. So in a way there is less risk after building.I am still not near my limits in servicing loans. Far from it.
I think you already know the answer. The build will lower LVR and therefore risk. Why would you not want to lower risk?

So what are peoples thoughts. would you generally jump straight in and start the new build. Would you sit and wait to see what happens with the economy.
What's the economy got to do with it? :confused: Prices for the new build will only increase as time goes on. For me, I just buy when a good deal comes along and I can afford it. I suppose it is the equivalent of dollar-cost-averaging in shares. Most people are very bad at trying to "time" an entry point (me included) but it is clear we are in a rising market - so there is every chance your final build will be worth more than what your calculations are saying now.

Congratulations on your achievements so far. Now is not the time to rest on your laurels :)
 
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