Corner block on a main road subdivision

Hi all,

I'm hunting for my first IP and have found this forum to be priceless in terms of developing my strategy and basic understanding of what is required to get there. Thanks everyone so far!

I'm looking at a particular property which appears to be decent value (to me) and I was hoping if someone would be able to poke holes into my theory as to why it isn't a good buy.
The property has also been for sale for quite some time 120+ days, so I'm worried there is something my newbie eyes aren't seeing.

My strategy is B&H (10 yrs+), focusing on opportunities to add value by subdivision.

Block info:
- 658 sqm
- Corner block on a crescent / main road. Although the number of block is on the crescent side, the driveway is from the main road. From previous threads it seems the consensus is to stay away blocks on main roads for IPs due to lower desirability based on a number of reasons, unless it is for subdivision (this won't be happening for a few years yet though).
- No overlays or easements on the property
- Currently tenanted at $290 pw
- Suburb median $309,000
- Listing price: $310000
- 3 electricity poles around the property (you might be able to see this from the photo).

Of course, I'll be calling the council to do further DD on subdivision and to see if the driveway from the main road will be an issue.

Any helpful criticism would be much appreciated.

Seapig

 

Four obvious issues...

The electricity poles might be in the way (eg one of them might be where you need your second driveway).

It has been on the market a while so there may be something wrong with the property or price, or it might be an area where everything takes ages to sell which could bite you if and when you need to sell.

Based on the buy-in price the numbers might not work for a proftable development.

Dwelling on corner has to comply with minimum setbacks on both streets which can chew into your available space.

 

@JacM has raised some very valid points.

A real concern would be the buy in price of 310k. If that's what a house on a full sized block is worth.. What does it make a subdivided property worth? And the new rear unit build?
Once build and sub div costs are accounted for, it may be a very skinny deal.

Noticed on the map that there are nearby sub divisions...are these recent? The value of these would give you a good idea on the feasibility.

 

Hi Jacqui, thanks for your reply. I didn't realize that was a min setback for a corner block, I'll definitely be asking the planning department for more information.

When driving around the area, I noticed a lot of corner blocks like this (see pic below) on the same main road sharing a common driveway. That was why I initially considered the block to have a similar potential.



Definitely agree there may be something wrong with the property or price - wish I had a crystal ball to tell me what it is!

Hi Conner,
Thanks for your comments!
I have looked at the other properties and dug up some info from RE.com.au / Onthehouse. Majority of properties in the crescent have been developed.

Block 7
Unit 1 (382 sqm) - Sold $245k 2008
Unit 2 (322 sqm) - Sold $222k 2006

Block 9 (5 units built on it)
Unit 1 (219 sqm) - Sold 2011 $290k
Unit 5 - Sold 2011 $320k

Blocks 13-15 (have 5 units built on it)
Unit 3 (313 sqm) - Sold 2013 $325k
Unit 4 (356 sqm) - Sold 2014 $335k
Unit 5 (353 sqm) - Sold 2016 $355k
I think these were all built in 2012-2013.

After building 2 units (~$150k each) and selling them for $300k each + subdivision costs...you're right, any gains do seem pretty slim....

 

There's a minimum setback for any block. The nuisance is if you are in the middle of the street, you might be allowed to build within a metre of the fenceline or closer, but if there is no fenceline, you are subjected to rules of minimum setback to the street.

On the flip-side, a corner block could be handy in a subdivision situation in that it may be easier to provide independent driveways for each resulting dwelling.

 

Look I have no idea about your local roads etc but put these phrases into context.

"Yes...Hi....I'm looking for a house to buy. Nice neighbourhood, definitely. Maybe *insert suburb*? Yeah I like that area. Is it in my budget? Great. I'd prefer something on a main road, though"

or

"Yes I'd like to rent a 3x2 in *insert suburb*. Preferably on a main road."

Said no one ever.

 

Be careful - doesn't seem as attractive as you think it might be... return costs seem low for the outlay.
Check - is the "main road" an "arterial" - will you be able to get access off it (Vicroads may have a say about that)
Setbacks - "main setback - the same as the house next door, or 9m which ever is the less
Side setback - to the main road, 2-3 m, depending on interpretations and Council attitude. But probably too close anyway
Power poles could limit access points

Have a talk to the Council...then maybe a planner

 

Thanks Aaron and Tufan!

I went to have a second look at the property today with those points in mind and decided against it. It was during peak hour (5:30-6pm) and it was extremely noisy, even worse than I anticipated!

 

I thought it it references Rescode in the zone (the secondary frontage is 2 meter irrespective)

A3 and B6 Street setback