Buying a house in an area zoned for Apartment

Hi all,

I'm about to buy a house in Brisbane which is zoned medium density residential (NPP-03)
It's a double block with a fairly good house, so it would generate a fairly good rental return. It would be still negatively geared.
I have a good business so being negatively geared is not an issue.

I did all the due diligence, talked with the council, etc.
At the moment it doesn't sell more than 15-20% more than a similar house on a similar block in the area that has normal residential zoning.
I know Apartments are out of favor at the moment but I think this will change and I hope my investment would offer substantial capital gain in the future.

Do you think it is a good idea?

 

What is your strategy ?
Would you be buying it personally or would your business be buying it ?

If you can afford to hold, and maybe buy the neighbor(s) when the opportunity arises then it is land banking, sounds good for a long game

 

I wouldn't buy it without knowing in intricate detail what its development potential would be, and the end values/costs of such a project.

Paying more for a property with development potential without knowing what that potential is seems like a very poor way to go.

 

It would be a personal investment. Yes, it is mostly land banking. I have the cash flow to be negatively geared, no problem there. I know there is an oversupply of apartments so the imminent development potential is poor.

The property is big enough to develop its own without purchasing the neighboring property. Of course, it would be better if it was 1200m2+ as it would enable the developer to build 150% of the land area instead of only 100%.
The house next door is also for sale, but the asking price is about 25-30% more with a house that could be rented only for half as much. Purchasing that one would put us significantly in a negatively geared situation.
We called the council, talked with a city planner, and it all looked good. We couldn't find any deal-breaking issues.

We talked with the agent of the neighboring property and he said he sold both properties together to a developer about 18 months ago, but the contract crashed. The price was about 2.5x higher for the two. Considering that my pick is cheaper and has far better rent, it sounds like I'm paying about 30% less.
It seems the other owner stuck with the old price whereas the owner of this one is keen to sell. There is another block for sale nearby that is even more expensive with a house that needs some improvements to rent it out.

 

We have a place called Mandurah over here in WA that kinda sounds like that. Plenty of apartment zoned land for "cheap". But the development potential is pretty much worthless. I think sellers snare the occasional out-of-towner with talk about development potential now and again.

I stand by my original comments - if you don't know how to develop it (and therefore assess its development value), then I wouldn't touch it.

 

Which suburb or area in Brisbane?

 

it is Chermside, 10km from the cdb

Thanks for your feedback, but Mandurah is 76km from the CDB. I wouldn't touch it either. Chermside is 10km from the CDB, it is also zoned for Craigsea State High which is a pretty good public school. There are a few recent examples for apartment blocks of the same size blocks.

 

Suburb seems ok. Better make sure you do all your DD. Don’t make the mistake like owners of the below property;

Check out this property at 8 Kuran Street, Chermside 4032
8 Kuran Street, Chermside, QLD 4032 - Development Site & Land For Sale - realcommercial

Sold 1.6 m in 2008, then 1.2 m in 2014, then 1.4 m in 2015, then now listed for only 1 m.

It’s hard to build.

 

Thank you, I didn't see that. I will look into that and compare.
It doesn't have a house so definitely it wouldn't work for us.

 

Why do you think it's hard to build? What's wrong with the property you mentioned?

 

Sewer lines intersection underneath