How valuable is a larger plot of land?

Actually I have a lot of questions not just about land size.

Hoping you guys can let me know if I've missed anything in my considerations.

Goal: Buy and hold for 10+ years, would like decent growth in next 3-5 years.
Due to personal, career and financial reasons, I do not expect to be able to renovate within 3-5 years.

I've eyed up 2 properties in the same suburb. They are priced very similarly. Neither of these look to have much possibility for change in zoning (both low density residential).

Property 1:
600sqm.The other properties in this street are around the same land size.
3/1/1 lowset
40 Year old house, room to create growth with cosmetic renovations.
Expected yield of 4.2%
Bus + train transport
Lower socio-economic area

Property 2:
450sqm. The other houses in this street are a mix of 450 and 600+sqm properties.
4/2/2 highset
Sub 20 year old house, not much room to create growth.
Expected yield of 4.5%
Bus only transport. Much closer to shops.
In a higher perceived wealth area of the suburb. 4 bedroom houses with 600sqm+ in this area are easily 10-20% more than this one.

Justifications/Assumptions
4 Bedroom vs 3 Bedroom

• ??

Old house

• Room to create growth in older house.
• More maintenance

Newer House

• More depreciation?
• Less maintenance

Larger land

• Higher rates
• More land tax
• More growth?

I'm leaning towards property 2 purely because I won't be doing renovations for several years, and it seems to require much less work. Am I overlooking anything? Is land size overrated? Do any of you actively avoid small plots? Highset vs lowset?

 

The larger block may have the possibility of adding a granny flat. So for the sake of $100k or less you'd get another $10-15k or more depending upon the location.

 

I avoid small plots unless they're priced close to land value (free house, why not).
Of course, small is a relative term, it all depends on what the council will let you do

 

For a 10 year hold, and assuming it's close enough to a CBD with limited land available and increasing in density, more land every time.

You'll pay a tiny bit more for something that will become exponentially more valuable.

Use Sydney as a reference point to illustrate the concept. Have a look at what an 850sqm block 7km from the city sells for in 2016, then a 600sqm block next door. The % difference in pice will STAGGER the mind.

Then check out how small the price gap was in % terms a decade ago.

 

I find it bizarre that people fork out 1.25mill or more in my suburb to buy a house on land with the intention to knock the house down and build a new house to replace it. Even land with existing solid brick properties on them too. But an agent said, people look for level land, north to rear aspect is ideal. If not, it can easily knock 100k or more off for the purchase price. In my area, land parcels of 750sqm or larger are normal. In the new outer areas, you don't get that. So people are looking for the land....

 

It's virtually impossible to give you the correct advice on such limited information. Every market is different. Buying property isn't primarily about buying a house, or land for that matter. It's about buying 'the market'. Hence location is the most critical aspect of property investment.

You've not said where you're buying so I can't analyze the market, decide what property suits that market and even if that market suits you and your aspirations.

I'd advise taking a step back from this approach to formalize a complete strategy with clearly defined goals, buying parameters and exit strategies. I'll post another thread shortly on setting up a brief, and another on defining your purchasing area (which will include size/ property type).

 

in melbourne now it is more about the new planning zones etc that were recently came to effect last year. Even if you buy a 750sqm block and the zone states that a dwelling requires 450sqm minimum you can't do much. It doesn't really matter. for footscray you could have a 330sqm block and still subdivide so sizes doesn't really matter it is the zones that matters.

 

Posted a lengthy thread with my thoughts on "land" here Creamy: Land, what to buy or where to buy?

Hope it helps provide some insight into how to look at an area and what to consider before looking at the actual parcel. Will add another thread soon with how to look at the actual property (including its lot) and using other properties to ascertain value.