WA If you owned this Perth development site, would you hold or sell?

Discussion in 'Where to Buy' started by JL1, 16th Feb, 2017.

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1,000sqm R50 site near Glendalough Station - hold and rent, or sell now?

  1. Rent it for $450/week, re-assess in 6-12 months

    2 vote(s)
    40.0%

  2. Sell now for $900k

    3 vote(s)
    60.0%
  1. JL1

    JL1 Well-Known Member

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    I'm chasing thoughts for my parents' situation on their current PPOR. They are moving east and downsizing their portfolio, selling some and retaining others.

    What: 1,000sqm block with a rennovated 3x1 on Main Street, Osborne Park zoned R50.
    Development potential: either 8 or 10 apartments. It is within 800m of Glendalough station so it gets concessions on parking requirements. No existing DA. They have no interest in developing themselves.
    Loan: 700k
    Potential rent income: offer received at $450/week, managed privately.
    Potential sale price now: assuming ~$900k based on recent sales

    My opinion is to hold 6-12 months as i think the market is at bottom, and for the ~$12k holding cost, they will more than likely make that in higher sale price. The only other downside is potential opportunity cost by not re-investing in Victoria.

    What would you do any why?


    EDIT: also, interested to know what would you personally value such a site at.
     
    Last edited: 16th Feb, 2017
    JL1, 16th Feb, 2017
    #1
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  2. wylie

    wylie Moderator Staff Member

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    I'd be holding it.

    We have a DA for townhouses, but have not yet even started to think about building. We have to shift houses before creating the building block, and won't do that for another year minimum. We've never developed so I'm just saying what I've learned as we've gone through this process.

    When we were looking to see what it would cost to build, we also looked at what a builder and/or developer would pay for such a block, i.e. to see what its value would be before starting the build.

    We were told by a developer friend that he would not pay more than $200k per townhouse for the block. Four townhouses means this block to this friend would be $800k. He wouldn't pay more than that.

    An agent told us developers/builders would pay us $250k per townhouse. That put the value of the block at $1m. This is over a year ago and another agent a few months ago (with a well advertised "glut" of apartments being built in Brisbane) said the heat had gone out a bit and valued the land at $800k.

    I think you need to ask an agent who has links to developers what they would pay for the block. That is the best way. We actually were offered a low price, which we declined. We were not looking to sell.

    Next day he came back $200k higher from the same potential buyer. Clearly, we were being lowballed (and we knew it). We said no again. We were not selling at the time (and still aren't selling).

    We are holding and will look at pricing up the build when we are closer to needing this information. But the ballpark quote to build four high(ish) spec townhouses, based just on the DA came in at $1.3m and $1.5m from two builders. I suspect it will be more like $1.6m+.
     
    wylie, 16th Feb, 2017
    #2
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  3. thatbum

    thatbum Well-Known Member

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    Answer might depend on whether they are buying a new PPOR straight away or just renting after this.
     
    thatbum, 16th Feb, 2017
    #3
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  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I agree with @thatbum to maintain it as their PPOR and CGT free status they would need to rent in Vic - would that suit them? There is some leeway with purchasing another PPOR but the crossover of the 2 can't be too long.
    Not knowing where on Main St or if the block is star shaped it's hard to say how much it's worth but it's probably around that price.
     
    Westminster, 16th Feb, 2017
    #4
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  5. JL1

    JL1 Well-Known Member

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    Thanks for the input everyone, they have bought a new PPOR in Vic already. I was trying to talk them in to renting for a while but they had their minds made up. On the plus side, the loan for this was 100% covered via an offset so the new PPOR is debt free and the loan now resides with this one.

    The point about CGT is a good consideration. I assumed that they would be able to get around it if less than 12 months, but thats a pretty poor assumption to make.

    Its a 20x50 square block, consistent incline over the 50m puts the rear about 1 storey above the front, giving city views from a multi-storey dev.
     
    JL1, 16th Feb, 2017
    #5
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  6. JohnPropChat

    JohnPropChat Well-Known Member

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    If they don't have interest and or money to develop themselves then I say take profit than take hope that things MAY be better a year from now in a falling/bottom market.

    Have to consider tax implications etc but I say Sell.
     
    JohnPropChat, 17th Feb, 2017
    #6
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