Keep the backyard or take the cash/equity?

For many, the great Aussie dream is to own your own home. Often for many Aussies, a dream home must also have a backyard.

I am interested in hearing peoples thoughts on the pros and cons of developing or sub-dividing the family backyard.

What value do you place on your backyard? Is there a dollar figure or net return that would change your mind and make the decision easier?

Have you subdivided your block either selling or holding the new dwelling and regretted the decision?

I am currently in the planning process of my first potential subdivision and had many conflicting thoughts. Hoping to gain some clarity in my decision from other peoples experiences. Being 27yo without a family, the decision is definitely swaying towards the financial gain however for many families i'm assuming the decision may quickly swing.

Pros:
- Improve equity position if holding new dwelling
- Receive rental return from backyard if holding new dwelling
- If selling, receive a nice cash injection to help pay down PPOR
- Existing home may not be your 'forever home' so can always sell or rent and buy elsewhere
- Room for the kids or animals (if applicable)


Cons:
- Capital gains tax if selling - eats into end profits
- Stressful process which some may not enjoy
- Lose the backyard
- Subdivisions may detract from neighborhood charm
- Lower value of existing home
- Costs blow out during planning or building stage minimizing profits
- Negative feedback from neighbors

Cheers!

 

I don't own a home but I share a 3x2 on a 357m2 block. There is too much yard to look after but then I'm not much of a gardener. There is enough lawn out the back for kids to run around if the owner ever decided to have kids.

 

Quite a lot. I'm on 1330m2 which isn't a massive plot - but compared to most Sydney blocks of 250-350 is enormous.
However if it's an investment then I would have no qualms subdividing if the return made sense. Supply and demand. If there's demand for 2 smaller blocks where you currently have one - then you may as well take advantage of it. As long as it serves your investment plans.
I love my house and block - but when we outgrow it, my plan is to add a granny flat to the back of it with seperate road access (I'm on a corner) and make it dual income. This makes sense for our investment planning.

 

High Five!

I've not looked into your location or block of land but I reckon you could do quite a bit more than a granny flat on yours - subject to your council. So nice having that potential.

 

Possibly,
I'm in BMCC though (fairly anti-dev)
And I've got a stormwater easement through the middle of the block.
That said - one of my mates up here is a town planner - I'll certainly be talking to him first.

 

Ahhh yes... one day it might be more development friendly!

 

I wonder if I could sneak 2 granny flats on... it's certainly big enough - each with its own yard and driveway.
Hmm

Edit: I do doubt it though..

 

We value a big backyard a lot as we have a pre-schooler.

And we are actively searching for a larger backyard. It is primary motivating factor.

For an investment - unless I was trying to landbank for the future (so get subdivision potential) I would go for a smaller yard. I find tenants are not the worlds greatest gardeners.

 

We did it to our ppor I had lived in for 7 years, but we knew we werent planning on staying there for ever. It worked out well for us. We stayed on in the new house (sold existing) for just over a year afterwards, it was good zero maintenance yards and near big parks with playgrounds ect. So even though we lost the backyard we had more time to do things and head out and about, this was with 1 kid and the second arriving half way through our short stay. Now moved on to bigger things

 

I personally prefer big yards either PPOR or IP in NSW especially. For IP it allows me to build a grannyflat if it suits the market. For PPOR, a place to relax and kids to play cricket and activities. so really depending on what you envisage your life would be in the next 5 to 10 years.

What's the demographics like in your area? if most have a moderate sized yard then the demand for a yard is probably there.

 

Under the cons also -
Lack of privacy
limit your market when selling?? dependent on whether tightly held area??
No control on what will be built


One way to get rid of some of the negatives is own a property which is a corner lot, then you have the best of both worlds, you can add value, both properties have frontages which will provide higher resale, no privacy issues.

MTR

 

We considered this with our last property that we now sold which was zoned duplex on 880 sqm lot, we would have made a killing but lifestyle was more important at the time so we did not go ahead.

In saying this I think can be a brilliant way to add value but it will come down to doing your homework for the particular suburb.

Its important to understand how it will effect the value of the original home, what the numbers are and whether this product will be in demand.

I would also consider not just selling the land but building on the land and looking at all the scenarios, and $ value. Generally speaking you will make more money if you build?

 

I personally couldn't do it. I find hammerhead/battleaxe blocks ugly and I love having my backyard. In my ideal location of where I want to live (6km from CBD) the area has been overtaken by hammerheads because the blocks have great depth, but not that much width. The only houses that aren't being developed are the old character houses but they come with a premium, which I can't afford at this stage in my life.

 

The suburb is primarily houses on 650-850sqm blocks however over the last 5 years has seen move subdivisions popping up which seems a similar trend in the South Eastern Melbourne suburbs as land values rise. My block is in a court and out of the approx 14 blocks, 2 have been subdivided.

Looking at comparable subdivided blocks with new townhouse builds, recent sale figures show 3-2-2 townhouses selling in the $640-$680k range. Based on estimated project costs and recent comparables I would be making an approx net return of $200k (factoring a reduced value of existing dwelling of around $80-100k). My plan would then be to hold both properties long term and rent the new townhouse to take full advantage of depreciation.

 

I was wondering what is the % of properties in Melbourne that are battle-axe subdivision? It seems quiet common compared to other States to have this approach, but was wondering the % of dwelling in any given Mlb suburbs that has this subdivision.