How small a house is too small?

Fair enough, if it works for you then that's great. I don't plan to see any of my IP's but if I have to I want to be able to appeal to the broadest market possible.

 

Yes I've already called a well known local agent who has been working in the area for 7 years. He advised to build as large as possible, because his clients usually want larger homes in the area. He thinks less than 20SQ is too small...

The area has around 4000 dewellings. 1% are freestanding houses less than 20SQ. 5% are townhouses (some less than 20SQ and some larger than 20SQ), and the rest 94% are freestanding houses larger than 20SQ..

 

Unless you can find a niche that works you will need to figure out a way to build 20sq. In the end you won't make money building a product if there is no demand for that product.

If you don't want to build 2 storey then @Phase2's idea of the first floor of a 2 storey now and second floor later has merit.

Otherwise, have you considered selling the block?

 

Thanks. I will have a think about it.

 

It's a very complex question as you know but I get what you are saying.

Things to consider
- what does the zoning of the block support, if it's a low density area then it's *probably* going to be a 3 or 4 bedder type area
- if it is a low density area does the council or state govt offer any density bonuses for offering more diversity and affordability for the area? In Perth we can get density bonuses for building 1 bedroom houses of over55s/dependant occupant housing
- if it it mid density then consider anything from 1-3 bedrooms to complement what is existing available and what might be missing in the area. Nice areas have issues offering smaller dwellings which can appeal to people who want to get into nicer areas
- if it is mid density then it is usually best for your own budget and to maximise what you can do on the block so that the rent covers the mortgage payment. No point building a big duplex on a triplex block as it will be heavily negative geared.
- in terms of single storey vs double storey consider the demographic of the area, people who are over 50s are really enjoying single level living. In some instances the cost of going double storey does not incrementally increase the end value. For example if a single storey house costs $250k and a two storey house costs $350k you want the end value to be *more* than $100k more otherwise there is no point as the construction will take longer, holding costs will be more, interest will be more etc etc

 

Great point. REA will have insight here. Also ask about what the next purchasers want. While you may be looking to hold long term now, things can change and I would hate to be left with something that can't be sold due to not meeting market needs.