Build, sell, keep what is the best option

Hi All,
long time reader but first time posting.
I am from sydney.
My wife and I have a PPOR worth 1.7m with 300k mortgage.
We have an investment worth 800k with mortgage 500k.
Therefore equity approx 1.7m.
We would like to update our PPOR. We are 40 years old with 2 kids. Our combined income before tax is approx 250k.
Some options are:

Option A. Sell our investment and PPOR so we can purchase a new home for approx 2.4m.

Option B. Keep our investment and upgrade PPOR.

Option C. Our investment is DA approved for 3 homes which would be worth 600k each upon completion. Build costs approx 800k. Do we build this first, sell then upgrade PPOR.

I am not sure what our best option is and not sure who to turn to for advice.

 

Build 3 homes with 800k? Seems a bit too low.
What kind of homes?

 

Attached single storey triplex brick veneer.

 

But if the IP is worth 800k now, and build another 800k just so it's worth 600x3, that doesn't sound like much profit?

 

That's 200k additional profit for 7 month build. I paid 550k a few years ago. If I sell as is at 800k it's 250k profit but if I build and then sell then its 250k+ that extra 200k for developing. That's the only reason I was considering.

 

That extra 200k seem wrongly low with the risks associate with KDR to me…

 

The risk associated with a KDR is the builder. Anyone can build. But a good builder is one who finds the balance between time, cost and quality. If you manage these 3 items and you have a track record of delivering projects, your associated risks are eliminated.

 

It is just my 2c, 10% potential in a year is too low for me to even think about, not to mention the numbers do not add up. But I only try to help review the idea, not against you.

 

Rule # 1 in property is only sell if you absolutely have too and as Rolf said you need to run some numbers first to see what fits the scenarios above, may only b 1 choice or all 3 depending on what the numbers say?

 

Risk can never be eliminated. Ever. Only reduced.

 

Some very rough figures to consider (not accurate but think about) and lots of assumptions - check what applies to your circumstances:
Option 1:
$250k profit sell as is
CGT tax 50% discount
Taxed on $125k = say $60k tax
Profit after tax = $190k

KDR Option:
If all calcs correct
$450k profit
Less GST - say $40k
Council contribution fees - $50k
Demolition - $20k
Holding cost for min 1 year (including sale / settlement period with no rental income) = ? $50k
Profit = $290
Tax on profit (no 50% CGT discount) = say $140k
Profit after tax = $150k

It may look easy / better on paper and you will need to adjust above for your personal circumstances - but more detail may change your calculations very quickly.

Good luck!