House 1 vs House 2 (IP purchase)

Hi everyone,

I was hoping to please get advice on the following two properties I have my eye on.

Auction for House 1 is before I will be able to inspect House 2, therefore I'm trying to decide if I should push for House 1 at auction, or whether I should hold back at auction and potentially go for House 2 instead.

I will definitely be doing more DD as more information comes through (Residex reports, Section 32) and hence won't be making my decision purely on the information below, however would really appreciate others' opinions as to which would be a better property for an IP (buy & hold).

House 1 and House 2 are about 3 mins drive apart.

House 1
Up for auction, no pre-auction offers.

Facts:
- Corner block, 812 sqm (~ 42m x 15m)
- Rental appraised at $290 pw.
- Property requires a repaint and some minor cosmetic reno (eg new vanity for bathroom)
- Dwelling to one side, so can subdivide and build while still retaining rental income
- On the 'better' side of the main road (where shopping centers / schools are)
- Next door to a kindergarten / childcare
- Easement along the 15m side of the property
- House on the same street sold for $340k, 800sqm block (old house, required reno, subdivision potential)
- House on the other street sold for $367k, 600sqm block (house required no repair, rental $340pw, no subdivision potential, 2 houses away from primary school)
- Anticipate that House 1 will sell for $370k+, this suburb has been getting pretty hot as of late
- GRZ1 zoned

House 2
For sale at $335k - 365k (not yet on the market)

Facts:
- In a court coming off the main road, 787 sqm
- Same suburb as House 1, but on the 'not-preferred' side of the main road when compared to House 1 - ie shops are on the other side of the road, directly opposite. Also on the same side as a lower socio-economic surburb (think Noble Park).
- Will most likey be cheaper than House 1 - thinking of making an offer prior to the house going on the market (thinking ~$360k to secure it after inspection)
- Renting at $300 pw
- No apparent renos required (based photos from 2015 rent ads)
- Dwelling in the middle, therefore will need to demolish to develop
- REA says vendors have plans / permits in place to build 3 units (but who knows - will factor this in when I see the S32 in a few days)
- Easements (awaiting info - will receive this soon)
- RGZ2 zoned

Thanks everyone!

 

I'd personally prefer straight forward corner block Dev build and retain. The numbers based on your info also seem good. Interested to hear what others think and their opinion.

 

Thanks for the responses so far.

If you have voted it would be great if you could justify your decision to help me weigh up the pros and cons of each property.

Also - how does one weigh up the holding costs vs potential CG?
I feel that if House 1 goes beyond $390k I feel that I would be better off with House 2 (~$360k) as they both have similar rents and the holding cost per week for House 2 would be lower. However, like Hodgo said, House 1 is more straightforward for development and seems to have more potential for CG (but $35k more?)
The median for the suburb is $310k according to RE.com if that helps.