Equity on a vacant block?

Hi, I've been trying to decide which way to go regarding my next purchase..

I've been focused on buying an established house in need of updating, reno, then hold for 2 years, then sell & use the capital gains to purchase another & work my way up the property ladder, it'll be a ppor & definitely won't be in a location that I want to live for an extended period of time, but I'll make sure it's in a growth suburb for CG.

But I've just read that I may be able to buy a block of land in a suburb that I'll be happy to stay in indefinitely with huge future growth potential & use the equity after a few years to pay for the home construction..

Please tell me if it's actually possible for the land purchase scenario or if I should just stick to my original plan.

Cheers.

 

You have to find the block of land first.

lvr? Can you pay the mortgage if there is no rent?

where will you live in the meantime? Youll need to rent or pay a mortgage for that?

you seem to be talking about some sort of landbanking but can you afford to do it?

 

I'd live with my mum & yes money would be tight but manageable for a few years

 

Generally land is not a good idea unless you have development experience or lots of money to hold it. The lack of income hurts.

eg you might buy an ip or ppor somewhere else, and sell that later to upgrade to where you want to live.

and your assuming you know where the huge future growth potential is. Whats your experience with property, timing cycles and identifying growth areas?

 

So the latter strategy seems to be buy and pray that it goes up in value? Seems just like pure speculation to me.

People used to say that Mandurah had huge growth potential once upon a time. If you bought land there in 2007 or so you are likely to still be 40% to 20% down on your purchase price in 2020.

Do you have a backup plan if there's no growth?

 

Lets outline what you are thinking of doing.

buy some land in an area you want to live in. You currently dont have the capacity to buy or build the house you want in this area.

you plan on the land going up in a few years so that you have enough equity to refinance and build.

meanwhile, youll have to keep paying the mortgage, get no deductions and live somewhere else.

what are the actual numbers here?

 

Basically yes, that is one option I was thinking.

I have 65k deposit, land I'm looking at is about 250k in Hallet Cove SA

I can & have been living with my parents putting in my share of board, bills etc. whilst currently doing the "savings" that the bank want to show I can manage the repayments.

It will be manageable but I think after a few years it will become a bit long in the tooth.

I'm not really thinking of it as an investment, but staggering a ppor, instead of basically flipping ppor's working up the ladder.

 

But maybe you should be, because essentially what you're trying to do is figure out a way to afford the PPOR you want right?

I'd say there's lots of different ways to do that, such as just waiting and saving, or investing smartly up to the point that you're ready to buy the PPOR.

You don't literally need to partially buy the land for the PPOR, and blindly hope it helps you afford the rest of it sooner. I doubt its the best way to go.

 

Think about it a different way. What you want is a ppor in a certain area. What will get you that? A certain amount of money. So actually, what you want is that amount of money.

find the fastest / easiest / safest way to get that money.

 

Very true.. thanks

So you're saying put my whole deposit on black? Haha

Nah good advice & a good way to look at it.
Any suggestions other than wait & save?

 

I wouldn't consider that the best option unless you have some money coming in to build within the next 12 mths.
Not sure of your area, I would not be doing this and relying on equity to build in a place like Sydney so shortly after a price boom for eg.
FTR I have owned vacant land, some for many years.

The alternative to save & wait could be buy/renovate/flip or create equity to borrow against imo.
Though no much gains if you've never done it before.

Shares? Not unless you inside trade imo lol
Learn to code? Now there's an idea.
You'll probably have to live on bread rolls and devon for a year or so and try increase your earnings

 

I'm not sure but I don't think Hallett Cove is a suburb where you can get growth from land or porperty. I may be wrong though.