All Topics / Help Needed! / Buying adjoining property

Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of TaraeTarae
    Member
    @tarae
    Join Date: 2004
    Post Count: 6

    This is my first post although I have been quietly observing for months now and would like some advice on a property.
    I live on a corner block and the neighbour behind me has been trying to sell his property for quite some time now. The property has reduced in price by about 90K in the past year. It needs work although not sure how much and I suspect they NEED to sell for other reasons also. Recently they came to me and asked whether I would be interested in buying the property or would I sell mine to them so they could develop the two lots.
    They say they have had offers for 240k from renovators and they would sell at 260K. The location is SW sydney. Ther cheapest house I have seen for sale in this suburb is 290K.
    If I bought this property it would be neg Geared.My question is – would it be good to buy this property with the view of eventually demolishing my residence and this one & developing into duplexes or something? In the meantime I was thinking of renovate to rent.

    Profile photo of buzzwellsbuzzwells
    Participant
    @buzzwells
    Join Date: 2005
    Post Count: 83

    What do you want to do? You have many options here!

    Some that come to mind are:

    You could go in with your neighbour, lodge a DA with your council and sell the lot to a developer. Cheaper and easier for you both, and possibly profitable.

    You could develop the entire lot yourself. Harder and much more time consuming. It will take longer to complete, however you may have more profit at the end of the deal.

    Could you buy it and rent it out. Sure this might be neg geared, but do you own your home? Could you possibly move out and rent out both and share the gearing across both properties?

    Also what does your council’s DCP (Development Control Plan) indicate what can/can’t be built in your area?

    Perhaps get a builder/consultant/architect to help you with some ideas…there are many more than I have just typed.

    Sounds like you might be in a good position though. Good luck!

    Learn, Love, Strive. Make a difference!

    Profile photo of LuciLuci
    Member
    @luci
    Join Date: 2005
    Post Count: 114

    As far as capital value goes – sounds like a case of instant equity!

    If you’re considering development – as buzzwells mentioned you need to see what the council will allow in your area.

    Also look around and see if the property/suburb is likely to garner interest from developers in both the near and distant future. See what other developments have occured in the area, and if your property will be suitable. You also need to consider neighbours who might prevent a development that would affect their own privacy and/or home value.

    There is no point in renovating if you are considering developing it or selling to a developer. The small short term increase in rental payments will probably not make up for the upfront expenses.

    You need to weigh up how much it is negativly geared, how much you can afford to be out of pocket, and whether this will still be a profitable deal if you don’t sell/develop for 6 months/ a year/ several years. Factor in potential interest rate rises, and the costs you will incur to buy and sell (and capital gains if you do this in a short period of time).

    At first glance, it sure looks like a good deal.

    Profile photo of achieverachiever
    Participant
    @achiever
    Join Date: 2004
    Post Count: 23

    I would suggest that you ask the council what there guidelines are for development. e.g. zoning, block sizes, setbacks, etc.

    One of the most important things to do is ask yourself – what do you want to do. Don’t answer the question of what everyone else is doing.

    Maybe selling your place to a developer could be another possibility – if they want it enough you might get an incredible price for it. Like Steve says – all of my properties are for sale.

    Work with the numbers and do what is feasible – the isn’t good to just dream of what you could do you need to be able to research sales in the area, etc.

    Best of luck

    Achiever

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    As others have mentioned check initially with COuncil that the area is zoned to allow you to construct something other than single residential dwellings on it.

    If yes why purchase the property when you could take out a Call Option against the property and saving the costs of acquisition and sale.

    Make the Option Clause subject to the issue of a accpetable DA and then get to work.

    Once your DA is issued assign the option for a fee and draw up a simple standard RE contract on your property.

    Cheers Richard
    richard at castlewhite.com.au
    Email me for details of our Qld wrap CD which gives you a full Installment Contract.

    Richard Taylor | Australia's leading private lender

    Profile photo of TaraeTarae
    Member
    @tarae
    Join Date: 2004
    Post Count: 6

    Thanks to everyone who replied. My mother in law lives next door to me and I think if we could get her on board that would be 3 adjjoining properties (2 infront and the one for sale runs behind both our backyards) to possibly develop or get DA for.
    Could someone tell me what a Call option is and how that works?

    tara

    Profile photo of buzzwellsbuzzwells
    Participant
    @buzzwells
    Join Date: 2005
    Post Count: 83

    A Call Option is when you negotiate the right (but not the obligation) to buy the property for a specific set price, at a specific date in the future.

    So you have the right to buy the property, but you are not obligated to buy it if your circumstances stage or if you no longer want to buy it.

    How it works:

    There are many ways you can get this going. Basically you want to have an option contract drawn up that states exactly how much you will purchase the said property for, what date you will purchase the property on, settlement details, and any other parts of the deal you wish to arrange.

    More info can be found on the Lease Option topic under INVESTOR STRATEGIES.

    And I do have further information on options so feel free to send me a message if you want more.

    Learn, Love, Strive. Make a difference!

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