What's your price?

We've just had one of the "our buyer wants your house" letters too, which I normally chuck in the bin.

However, this one peaked my interest and I called, mainly to get an idea of what a particular block could be worth. If it truly is of great interest, then the offer price should be good.

I'm waiting to hear what sort of money they are talking before getting too excited.

We were offered a fair price for each block, but two together allows development. This developer wasn't offering anything over and above what we would sell to a home owner who wants a big block to extend, add a pool etc.

We turned it down, and the next offer was $200K higher. (Does that mean we've made $200K in two days? :)) That first offer was about $600K more than we had been offered about a year ago by another developer :rolleyes:.

It still isn't really a premium over what we could get (according to the agent who took it to the developer). Added downside is that if we wait and get the DA through, we can spread the sale over three years if we ever want to sell. I prefer to sell the block with a DA and keep the front houses that provide us with income, or do the build ourselves. We have time to think about this.

It was a bit stressful though, not knowing what would come of contacting the agent. Ultimately, even if we had been offered another $200K again, we pretty much would be handing it back to the tax office.
 
We turned it down, and the next offer was $200K higher. (Does that mean we've made $200K in two days? :)) That first offer was about $600K more than we had been offered about a year ago by another developer :rolleyes:.

It still isn't really a premium over what we could get (according to the agent who took it to the developer). Added downside is that if we wait and get the DA through, we can spread the sale over three years if we ever want to sell. I prefer to sell the block with a DA and keep the front houses that provide us with income, or do the build ourselves. We have time to think about this.

It was a bit stressful though, not knowing what would come of contacting the agent. Ultimately, even if we had been offered another $200K again, we pretty much would be handing it back to the tax office.

Just ring them back and say if the extra 200k is on the contract then in 28 days it's yours,and walk and leave something in the deal for the next in line.800k in a year and I would think it's payday no matter how much it's cost with the ATO..IMHO..
 
Just ring them back and say if the extra 200k is on the contract then in 28 days it's yours,and walk and leave something in the deal for the next in line.800k in a year and I would think it's payday no matter how much it's cost with the ATO..IMHO..

I put the sarcasm face beside the low price we were offered by a developer a while back as it considerably lower than they were worth at the time. Had we actually sold for the low price offered, we would have been giving away a couple of hundred thousand. But I guess people offer low prices hoping to snag a desperate seller or a seller who has no idea what something is worth.

The recent higher offer by the developer, even the higher price, is still no more than they are worth individually if we sold them both individually. So just as we get the land in the middle to build on for "free", so does the developer.

So, after hearing from the agent that others have been caught up and had to pay tax as if the whole package was sold in the one financial year, if we needed to sell, we would do better to sell one this financial year to someone wanting a big block (could still put two townhouses in the back I guess), or a family wanting a pool.

Then we sell the second one in the next financial year. We could split the sale into two financial years legitimately, and not be caught up with an unexpectedly high tax bill if the ATO lumps them into the one year, even if we try to straddle two financial years.

To sell for the same price to a developer means a big difference in the tax we would pay, so we would want more from a developer. Clearly developers work to a bottom line, and to a profit margin, so want to get it for the lowest price they can.

I'm not against someone else making money as well, but we would be foolish to sell both blocks together and pay a lot of tax and not get any more than if we sold them separately.

We don't need to sell. My idea was to see if a developer wanted a clean block after the DA goes through. One was interested in the whole package, houses and all. But we also are giving away an income stream.

So, we will push on with our DA and re-assess then.
 
To me the value would be based on the rent I'm getting.

Normally a $400 000 house will rent for $400 per week.

However with the way I set up my IP's my $400 000 house rents for $750 per week.

So for me I would split the difference between $750k and $400k. So in that case it would be $575 000.

However just holding the property and collecting the rental profits would give me that $175 000 capital gain back in about 8 years when taking into account rental increases. Especially after doing a bit more work on it to increase the rental yield. Plus add in the 3% per year capital price growth means I would probably get that $175 000 back by just holding the property for 5 years.

Soooo hmmmm I don't know if I'd even sell for a $175 000 premium...

Interesting question. Don't think I'll ever need an answer for it though because no one is ever going to offer me such a high premium to buy one of my properties.
 
Everything is for sale at the right price, right?

I've had an interesting day.

An agent called me today with an cash, unconditional offer on a Brisbane south side property that isn't for sale (but I had previously indicated I would consider it).

My strategy is buy and hold, long-term.

I declined the offer (it was a pretty good offer, but no more than I would get putting it to market tomorrow), and I stated that it would have to be AMAZING by the time I tallied up repurchasing elsewhere for the same goal (stamp duty, solicitor, time spent searching).

I then had someone knock on the door (an unrelated party) which I answered dripping wet in a towel (not pretty, but they didn't baulk).

They also offered to buy the house and asked for a price. I said I couldn't name it...

She jokingly offered "a million dollars", to which I laughed "deal". (I would have even dropped the towel).

So, perhaps almost a philosophical question, but is there always a price where you would sell? Even if it doesn't suit your buy and hold strategy? Do you have a rough means to work one out?

eg... 8% growth pa for 5 years = $$$. I'd probably sell for that price today.

A pleasant conundrum.

Depends on if they are S grade, A grade or B grade properties.

Eg I have an S grade property whose market value is probably 5-5.5m but I'd never consider selling below 7m because I'd never find one again, at least not for 10 years. Even at 7m I'd struggle to sell this, I'd need around 8m to sell.

I have an A grade worth around 3.5m in this hot market (probably worth 3.2m in quieter times) and I'd flick it for 4.2-4.4m.

I have a B grade property whose council val is 1.52m and I would probably sell for 1.55m tomorrow, because this stuff is everywhere. In fact I'd probably sell for council val of 1.52m which I could presumably easily get.
 
Depends on if they are S grade, A grade or B grade properties.

Eg I have an S grade property whose market value is probably 5-5.5m but I'd never consider selling below 7m because I'd never find one again, at least not for 10 years. Even at 7m I'd struggle to sell this, I'd need around 8m to sell.

I have an A grade worth around 3.5m in this hot market (probably worth 3.2m in quieter times) and I'd flick it for 4.2-4.4m.

I have a B grade property whose council val is 1.52m and I would probably sell for 1.55m tomorrow, because this stuff is everywhere. In fact I'd probably sell for council val of 1.52m which I could presumably easily get.

Could you please elaborate on what you consider S/A/B grade? Is it to do with the size/position of a block relative to other blocks in the area?

For example: is a 1800m2 block in an area where developers are lucky to find 2 or 3 600m2 blocks side by side considered S grade?
 
Probably hard to define it with any particular physical characteristic.

But an S-grade is something that will hold value in a down-market and in an up-market people will pay anything for it - sky is the limit, or thereabouts.

An A-grade is something that will fall in a down-market and and in an up-market people will pay big for it.

A B-grade is something that no one wants to even LOOK at in a down-market and in an up-market people will pay market price or there abouts for it.

Cannot be defined by size, location or any factor specifically. But generally speaking, good size, good location, good frontage, good street, good suburb, amenities usually all add up. You need to tick most boxes to fit into A-grade or S-grade properties, but size is certainly not that important. Look at all those little cottages that sell for $1.0-1.5m above reserve.
 
These gains may be moot if you just end up spending it all to buy back into the same heated market.

That is excatly the problem. We have to move out of the area, but we always have had a dream to retire somewhere in a countryside. Now when this is a real opportunity much earlier than we expected, we are like paralysed, not knowing what to do.

Alternatively we could move to the area that prices have not gone as crazy as here, but where...

The recent sales in the area supports REAs estimates, but personally I do not believe that the growth will continue. When AUD exchange rates will start increasing and new visa requirements / freeze kicked in, party will be over in this suburb.
 
Top