We're considering buying a 50 y.o. brick home in a middle-ring Melbourne suburb with a view to eventually subdividing and selling off the rear block of land as a battle-axe block. We've no experience with subdivisions and don't intend developing anything ourselves. We plan to rent out the house and start the subdivision process at some stage in the future. The land is around 700m2, so should be big enough to subdivide, as the house is near the front of the land.
It's in a good location, a quiet street near shops and a train station, and the suburb's forecast to have above average capital growth, but the numbers aren't good - gross yield would be 2.5%, hence wanting to subdivide. As the house is 50 y.o. there's also no depreciation and maintenance costs would be higher. It would allow us to do a cosmetic reno (also a first for us), adding value and allowing us to increase the rent.
Our alternative would be to buy and hold a house in a middle-ring Brisbane suburb, but as we live in Melbourne we'd look for a set-and-forget brick house. It would be cheaper than a comparable Melbourne property and likely have a higher yield, but as it would be interstate we wouldn't want to reno it and would be unlikely to subdivide, so no options to add or extract value. We'd also have to arrange a property manager for the Brisbane IP; we'd self-manage the Melbourne one.
The Melbourne house would be fairly heavily negatively geared, which we could support, but the low yield is causing me some concern. However, wouldn't most houses in middle-ring Melbourne suburbs have this issue too? If we're planning to buy and hold, subdividing the land at some stage, is this still worthwhile in Melbourne or would Brisbane be a better bet given its stage in the property cycle?
I'd appreciate your thoughts,
GreenGoblin
It's in a good location, a quiet street near shops and a train station, and the suburb's forecast to have above average capital growth, but the numbers aren't good - gross yield would be 2.5%, hence wanting to subdivide. As the house is 50 y.o. there's also no depreciation and maintenance costs would be higher. It would allow us to do a cosmetic reno (also a first for us), adding value and allowing us to increase the rent.
Our alternative would be to buy and hold a house in a middle-ring Brisbane suburb, but as we live in Melbourne we'd look for a set-and-forget brick house. It would be cheaper than a comparable Melbourne property and likely have a higher yield, but as it would be interstate we wouldn't want to reno it and would be unlikely to subdivide, so no options to add or extract value. We'd also have to arrange a property manager for the Brisbane IP; we'd self-manage the Melbourne one.
The Melbourne house would be fairly heavily negatively geared, which we could support, but the low yield is causing me some concern. However, wouldn't most houses in middle-ring Melbourne suburbs have this issue too? If we're planning to buy and hold, subdividing the land at some stage, is this still worthwhile in Melbourne or would Brisbane be a better bet given its stage in the property cycle?
I'd appreciate your thoughts,
GreenGoblin