buying 2 properties next to each other

Discussion in 'Investment Strategy' started by magloop, 21st Jul, 2021.

Join Australia's most dynamic and respected property investment community
  1. magloop

    magloop Member

    Joined:
    19th Feb, 2018
    Posts:
    23
    Location:
    VIC
    hi everyone, this year i purchased a freestanding house (Property A) in my name as an investment which is currently rented from day 1.
    my next-door neighbours property has recently been listed for sale (Property B)

    if i purchase property B there is scope to subdivide the 2 properties into 3, 4 or 5 blocks in the future.

    The tenants of property A are moving out in September 2021 and I'm considering moving in and establishing it as my main residence to start the 6 year rule then. Property B is currently tenanted.

    what would be an ideal way to structure the purchase of property B to reduce a hefty landtax bill, future capital gains on a development etc. should i consider a trust to purchase property B?
     
  2. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    Depends what development you're actually doing, and what you intend to do with the development.
     
    Stoffo likes this.
  3. magloop

    magloop Member

    Joined:
    19th Feb, 2018
    Posts:
    23
    Location:
    VIC
    subdivision maybe build houses
     
  4. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    Mag, I think the word is synergies. Buying the next door property may create synergies (it's a good word not a bad one).
     
    John_BridgeToBricks likes this.
  5. magloop

    magloop Member

    Joined:
    19th Feb, 2018
    Posts:
    23
    Location:
    VIC
    haha what do you mean by synergies
     
  6. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,222
    Location:
    Sydney? Gold Coast?
    Have you checked the zoning? Or is this just wishful thinking?
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,095
    Location:
    Sydney or NSW or Australia
    The answer is depends.
    • Do you have other property in your name?
    • Do you have a spouse?
    • Do they own any property?
    • Do you own any other joint property?
    • Do you have access to a good property/structuring solicitor?
    • Do other structures get land tax thresholds?
    • Will you qualify for finance if you buy in a different structure?
     
    skater likes this.
  8. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    I think it means that it can open up more opportunities.
     
    John_BridgeToBricks likes this.
  9. Gen-Y

    Gen-Y Well-Known Member

    Joined:
    8th Nov, 2015
    Posts:
    3,770
    Location:
    Brisbane - Sydney
    I did exactly that recently on my latest 2020 purchase.
    Bought next door so I can have 2 wide block 40m to do sub-division later in Brisbane.
    I did have to pay above $20k what I perceive it was worth standalone.
    Plus the neighbour knew I own next door as I have approached them the previous year.
    All worked out quiet well in the end. He got 20k more and I got a bigger potential on my end.

    Edit - Yes it is bought in a Trust as I have exhausted my land tax threshold.
     
  10. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,095
    Location:
    Sydney or NSW or Australia
    That's where the opportunity/advantage lies - being able to do more on the block than the next bod & understanding the planning regs.

    The neighbour & myself have subdivisible blocks (require a 7 m frontage for each property) so 2 x 15.2m wide properties should yield 4. However, as the frontage runs off at a slight angle, the frontage is 34.4m being just shy of the required 35m for 5 sites. It may not sail under a CDC but an application to council isn't the worst thing if it yields an extra $500-600k compared to not being able to achieve the extra site.
     
  11. Gen-Y

    Gen-Y Well-Known Member

    Joined:
    8th Nov, 2015
    Posts:
    3,770
    Location:
    Brisbane - Sydney
    Yes I am still to decide what I want. 4 blocks or 3 blocks.
    4 x 405m2 or 3 x 540m2.
    The house would have a better config if it was on a 13m wide block x 3.

    The rules: Money talks, bull dust walks.
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,095
    Location:
    Sydney or NSW or Australia
    What is being offered to market (larger or smaller blocks), what's the price difference?Does the cost of providing additional services to the fourth outweigh profit generated?
     
  13. tedjamvor

    tedjamvor Well-Known Member

    Joined:
    22nd Oct, 2019
    Posts:
    218
    Location:
    Melbourne
    If you were doing 4 would you do 4 in a row, or 2 front/2 back?
     
  14. Gen-Y

    Gen-Y Well-Known Member

    Joined:
    8th Nov, 2015
    Posts:
    3,770
    Location:
    Brisbane - Sydney
    In my case for my size block - I can only do 4 in a row due to the 10m width minimum rules for Brisbane.
     
  15. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

    Joined:
    25th May, 2018
    Posts:
    2,407
    Location:
    Sydney
    Adjacent properties always give you choices. You should buy property B, even if you don't have the synergies fully figured out. You can do that later.
     
    wylie likes this.
  16. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    Strong disagree on this one.

    I wouldn't even consider it unless I had a very solid plan of how I was going to make 1+1=3 or more.
     
    John_BridgeToBricks likes this.
  17. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

    Joined:
    25th May, 2018
    Posts:
    2,407
    Location:
    Sydney
    I hear you. A plan is better than no plan.

    However, I know a lot of very wealthy older property owners, who didn't have a plan. But they had an instinctive gut belief that adjacent real estate was a good thing, and when neighbouring real estate came on the market, they bought it. It was only later once all of this real estate had been accumulated that they came up with a plan.

    If a neighbouring property is currently on the market with a 4 week campaign - 4 weeks might not be enough time to formulate a strategic plan with what you are going to do with it. Does that mean you let it go? Sometimes there just isn't enough time to have a fully formulated plan - but you still have to make a go/no-go decision based on the opportunity in front of you.
     
  18. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,932
    Location:
    Brisbane
    This is what we did. Bought without a plan, knowing we had big blocks, and could do "something" with them, even if not combined.

    As long as you aren't paying a premium (or keeping that as low as possible), then it is just two houses anyway.
     
    John_BridgeToBricks likes this.