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Bigger not always better

Discussion in 'Where to Buy' started by Northy85, 29th Oct, 2015.

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  1. Northy85

    Northy85 Well-Known Member

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    I've always had the idea that when buying a house with land you should always try and get one with as much m2 of land as possible. Now I'm not so sure. Unless the land is big enough to split and develop your just paying higher rates, maintaining more fences and landscaped areas for the same amount of rent.

    Examples is Logan, where you can rent a house for $350/week on a 600m2 block or pay the same and live on a 930m2 block. The larger block can't be developed (minimum 1000m2). Over the same period of 18 months both houses were revalued by the bank for $30k more. So the larger property didn't have higher CG, as might have been expected. The above is a real situation with myself and my brother.

    Does anyone else have similar stories? What are your thoughts?

    Cheers.
     
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  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    My thought is that down the track the council will change the rules and possibly you'll find 400 or 450sqm blocks are acceptable or they could change the rules and you'll be able to do a development on that larger land. So I'd still go with the larger land. Ps. I think the 930sqm land would be better for granny flats too. More liveable.
    So while it might not be of benefit right now, it probably has long term desirability as the city expands and grows.
     
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  3. Tekoz

    Tekoz Well-Known Member

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    @Gockie which means you've seen somewhere in Australia that Council ruling gets changed as time goes by ?

    I've heard about zoning changes can means more money per sq meter but not minimum land size change for dual occupancy.
     
  4. Northy85

    Northy85 Well-Known Member

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    I should look at it as land banking then. I suppose it comes down to weighing up servicability and time frame with potential future development profit.

    Cheers Gockie.
     
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  5. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Hi @Tekoz, Acceptable land use changes all the time... and as the city grows, lots get smaller over time. New releases in Sydney are heading towards roughly 350sqm but not so long ago it used to be 450, 500, 600sqm.
     
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  6. Excalibur1

    Excalibur1 Well-Known Member

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    I'm with @Gockie on this. I would always get more land as that would suit my strategy. I'm the hold on to it as long as possible type. SO that means there is future potential. Also granny flat until those changes happen are ideal on larger blocks. I'm currently building a granny on my block which is 780sqm. I'm making it look like battle axe block. This way I get higher valuation and higher rent. and tenants are completely separated. When the time comes (in 10 or so years) I will knock th granny flat down and build a house there when i can subdivide.
     
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  7. Big Will

    Big Will Well-Known Member

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    Back in the day it was a quarter acre block (1,000 m2) was a standard size.

    Wait for rezoning to happen and the value of the 900m2 property will sky rocket.

    Also maybe the smaller one is next 300m from the train station and the other one is 2km from a train station. If the properties were side by side and both of the same build quality then it might have more merit.
     
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  8. Northy85

    Northy85 Well-Known Member

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    Especially if they do what happened around Springwood, and make it LMR equivalent :D. The extra 300m2 could mean an extra 3 units (from 5 to 8)
     
  9. MTR

    MTR Well-Known Member Premium Member

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    Just because there is talk of rezoning does not mean it will happen, or happen anytime soon. I have seen many scenarios where there has been talk for year and years and then zip.

    My 2c worth - if you are paying holding costs for larger land component then a safer strategy would be to ensure that zoning is currently with council therefore you perhaps make some immediate gains once ratified, this is easy to find out via council.
    Alternatively buy land which can be developed, it may cost you a little more upfront but if the figures stack up its a strategy that can work very well, I call it investing on steroids.

    During the holding phase workout what you can build, costs etc. this is easy once you source the right people to assist and it wont cost much more than a survey of the site ($1500), and even another option of putting plans and permits together to on sell if there is a demand for this in this particular area.

    All this information is available and it is free if you chose to go this way.

    MTR:)
     
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  10. Northy85

    Northy85 Well-Known Member

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    cheers MTR, I'm actually looking at doing developments soon. I told my wife we need to wait for the market to give us some equity before we can do it though and in that time we need to set up a trust and network with some builders, town planners, real estate agents and other developers. We both lack patience.
     
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  11. Lisa Parker- Buyers Agent

    Lisa Parker- Buyers Agent Well-Known Member Business Member

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    I have seen councils change the minimum lot size in both directions. (Ie up and down on the min size required). If given the choice, all other factors make sense and it was a buy and hold, I personally would consider paying a bit more for the larger land which MAY allow development at a later stage.
    I would do some numbers to estimate how paying a bit extra now would impact my ability to move on with other IP's and also look at potential price per block on the future should the council decrease their min lot size and weigh up all the numbers. Of course, it's speculation and guess work, but it will reveal just how much potential upside there was.

    If it meant I couldn't move on with another iP I would be doing numbers on buying the smaller land plus another Propery versus the speculated upside on paying extra for the larger land and forgoing anothe iP.

    I guess it depends on how much the variantce is on sell price right now....if it's not much now, it could be a huge difference later IF council changes min lot sizes.


    Or if you know you want to develop, go straight for a dev block as per MTR's suggestion. If you know you want to develop, it's a waste of time speculating on a maybe when you could locate a sure thing.
     
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  12. Biz

    Biz Well-Known Member

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    I only buy properties that make sense today. If you want to develop or subdevide then go a find a deal that is profitable now rather than waiting 10-20 years for something that might not happen. No point sacrificing cashflow and other opportunities because you're tied up in a "one day I will" scenario.
     
    Last edited: 30th Oct, 2015
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  13. Observer

    Observer Well-Known Member

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    I'm with @Biz on this one. I reckon it's better to concentrate on the current value and your options as of today.