How much more would you pay for a property with development potential?

Discussion in 'The Buying & Selling Process' started by Creamy, 18th Nov, 2016.

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  1. Creamy

    Creamy Well-Known Member

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    I'm placing an offer on a property with development potential, however it appears from initial discussions that the agent and the seller do not know about the potential as it's not immediately obvious. Not sure about other parties.

    I'd like to offer something strong that would seal the deal asap, but not alert them to the fact that they could ask for a fair bit more.

    Say the median price was 500k, would you offer say 5% over? It's a suburb that's starting to heat up a bit, however the property itself is not in a desirable location (house next to the one at the end of a T street).

    Add like 10k deposit, an offer expiry and DD clause to double check things with council?
     
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  2. Agent30yrs.

    Agent30yrs. Well-Known Member

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    If the agent is stupid enough to let you do it. Get a lengthy DD period, pay what ever it takes to secure it and then go back at the very end of the DD ( and request an extension) go back and renegotiate it with all the "issues" the development has etc
     
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  3. thatbum

    thatbum Well-Known Member

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    Really is one of those "how long is a piece of string" questions. Shouldn't you be calculating it based on the extra value of the development potential?
     
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  4. Connor

    Connor Well-Known Member

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    Exactly this... There's no set % of how much more should you pay for dev potential.
    I've seen some potential dev sites sell for such excessive amounts that it becomes no longer feasible to actually develop it... And others at barley any premium over a 'normal' property.
    It really depends on market activity at the time in the area you've chosen.
     
  5. D.T.

    D.T. Specialist Property Manager Business Member

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    None
     
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  6. RetireRich101

    RetireRich101 Well-Known Member

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    I would offer 500k as if the information was unknown to you or the stakeholders.
    You can utilize the B&P and Financial Clause (typically 14 days and can be extended subject to the vendor) to ascertain your position....
    A DD clause in QLD is generally not necessary, but maybe more applicable in other States for your exit position.
     
  7. Agent30yrs.

    Agent30yrs. Well-Known Member

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    @Creamy have you considered the possibility that the agent and the owner know exactly what can and cant be done with it ? and development's not possible . If that were the case maybe thats why they are appearing ignorant . Seems bizarre to me that between the 2 of them they don't know ..
    can you share any more information about the property & what sort of development potential you think it has ? cheers
     
  8. Creamy

    Creamy Well-Known Member

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    @Agent30yrs.
    I did consider that it might not be possible, hence why I put a DD clause in it. I believe it's not immediately obvious that there's development potential because it's less than 800sqm. However it is less than 200m to the shops. I've talked to a town planner who said initial checks looks ok. There are some concerns with some small tree's in the council's nature strip but I've been told there are ways around it.

    My goal at the moment is buy and hold, with an outlook for development 3-5 years down the track. I'm taking the approach of looking at it like it was any other IP (as reflected in my offer), if I can develop it later on then it's a bonus.
     
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  9. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Well, what's the asking price? Medians rarely tally to anything meaninful in terms of what the right price for the property it.
    Location, state of the house and it's potential are what the REA will use to come up with the asking price. If they haven't factored in it's potential and you are happy to offer with a DD clause then I would give asking price or just below
     
  10. Agent30yrs.

    Agent30yrs. Well-Known Member

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    Makes sense, and they may not know . keep us posted .
     
  11. bob shovel

    bob shovel Well-Known Member

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    As little as possible to achieve maximum this:
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