re: 800sqm vs 450sqm new block of land

Hi everyone,

Goal: We are thinking of investing in a block of land to get some equity in future.

Scenario:
Say we have 800sqm and 450sqm land within the same estate.

Approx.. 400k and 320k. Difference of 80k.

If we were to build a 3 or 4 bed house around 300k.

Houses in the area currently rent around 3bed: $350-400 and 4 bed: $450-500

I would believe/hope the equity would be more in a years’ time on the bigger land but I would be losing money with the bigger block?

But is my though process correct.

Thanks

 

Go for the bigger one, it'll have better resale value / capital growth as they're rarer. Only reason you wouldn't would be if the smaller was in a better location.

 

Vacant block in an estate? Are you planning to build?

 

Thanks for the reply DT.

I would think so as well but if the rents don't increase much, am I not losing money.

Assuming rent increase to 550 and the 800sqm after the house build would be approx. 700k

 

Vacant block... Yes.

Planning to build.. Yes

 

Not sure about that estate specifically, but in most the smaller ones are far more common than bigger ones.

In my role as a PM, something i see all the time is where there's a bunch of newly built houses all online clamoring to undercut each other to get a tenant in. If you're a 4x2 with 2 living areas and an outdoor area, you have something different/better to offer than the masses and as a result have a better likely outcome.

 

I believe the best strategy with H/L is smaller blocks with bigger houses in terms of best outcome for dollars spent.

I remember he said something about these new estates not really catering to the single mum market.

Something like a 3/2/2 on 350-400 sqm block

You should talk to @sash who has done a few H/L investments.

 

Thanks Beelzehub.
I have posted sash.

Sorry for the amateur question but what do you mean by "3/2/2 on 350-400 sqm block"?

 

bed / bath / car numbers of

 

@Propertunity : salute

 

You're thinking right RJS.
You're pretty much spending an extra 80k for a negligible increase in rent... Not worth it at all.
Go for the smaller block and build a 4 bed home. You outlay vs returns will be alot better.

 

This would totally depend on where it is and what is around it, there is also what the renters want and what the home buyers want.

There are places I watch that the answer would be different for each (block and house).

You need to work out what is what & who is who in the zoo

 

As above, you need to do some due diligence on the area
(Other places being build, target demographic)

I've noticed with lots of people a back yard is no longer required
Lots of people rather spend their time in front of the TV, in a Cafe or just "out" rather than mow the lawn, kick a ball with the kids or tinker in the garden

One last thing, dont rule out the larger block, ask "if" it could have 2 smaller/tasteful units built on it, costs would be a bit more, but offset by 2 more affordable rents for the area

 

I dont understand what is with people andd larger land component
Unless you can add value later.

You would be paying more land tax.
The tenant has to maintain all the vacant land.
Unless you can build or subdivide in future, I dont see value in it.

I would prefer smaller block and a product wgich is in demand in the area.

Having said the above, what state it is?
What is the demograpgic of the suburb?
Holding costs?
What sort of charges are there for pamd tax in that state?
Factor all these in and you can make a decision.

There has been cases where smaller land lots have appreciated more than latger land lots.
Would.it be too much if i ask the details on state and estate?
The numbers and rents are compelling though.

Regards

 

Bigger block will give you a lot more options short and long term. As others have said it depends on the demographic as well. Imagine if it was all retirees wanting to downsize. Where is the estate located?

 

NSW

NSW, West Sydney

 

Outer West Sydney

 

I'd say bigger block would be the best option. A lot of infrastructure planned there over the next few years targeting job growth.

 

Thanks Tony.

The think I'm worried is holding costs. at the moment. rents around 450-500 for 4 bed.
With the larger land plus a house build would make the loan approx 700k.
Rents would (hope) gradually increase but am I not negative for a couple of years. And I am hoping this property would help me get some equity out.
Sorry for the amateurish questions.

 

It is not all about you & of course your free to buy the smallest blocks you can find, or units, or whatever......