Positive or Negative Development

Have a read of this
How to Cope in a Crash - PropertyInvesting.com

Extract... and why it makes no sense unless its a profit

If you aren’t making a profit, then you must be making a loss, because breaking even is really going backwards (because your investment capital could be invested risk-free in a term deposit), and the bigger your loss, the faster your hard-earned wealth is evaporating.

 

100% of people tell me their proposed development will make money. You build shiny new property and sell - You have to make money. Thats what developers do right.

80% wont even have run a detailed feso before buying.

25% call me to ask about tax after the project is completed. Often because they read something I said on PC. Of them 50% will ask AFTER a sale. Typically overpaying $25K or more in GST. Or buy land from a new land release and find they cant use the margin scheme - at the time of sale.

I estimate 50% of those doing 3 or less units / villas etc lose money.

In the last year alone I have see three buy sites to develop at auction and been incapable of either using the site (STCA) or have been unable to finance the purchase. Another is presently demolishing what was built over the past four months. Council will then consider a new DA application once the structure is removed.

 

Really though most people's answers here are around the risk versus reward, not necessarily the loss. I can think of plenty of instances where one must spend money (loss) to make a long term gain-e.g. buying equipment for a restaurant kitchen-very expensive, but eventually you aim for the meal sales to more than pay it off.
Negative gearing is loss to make a later gain & I know it is lampooned on this forum, likely something I would never try, but it has worked & does work for some.

 

This example just goes against the nature of business and I wouldn't hang around that wacky team B for much longer.

If at the same time you could renovate the front house to increase the rent, or decrease the cost of the rear house it might sound more reasonable. Otherwise renovating two smaller properties would be my preference, and you don't have the immediate destroying of 50k value

 

Really seems like you're pushing to make this deal stack up. Move on...
Can your money be used better elsewhere...