Should we develop our corner block?

We have two houses adjacent to each other on a corner block (as a development site, both houses, if sold together are likely to be worth $4.9–5 million) that are capable of generating $1,750 PW in rent.

As we have some other properties that are generating a stable rental income as well, we can live somewhat comfortably with the income these properties generate due to our relatively low expenses. But we wouldn’t mind having more income from our portfolio if that’s possible.

With a 2 million+ fund (own fund + bank loan), we're deciding between the following two options to hopefully maximize our investment performance:


Option 1: Build five boutique townhouses on the site and rent them out for a total of $3,750 PW.

Option 2: Purchase one more single house with a $1,200 weekly rent.


Option 1 provides a higher rental return ($3,750 vs $2,950).

With Option 2, we will be adding another house to our portfolio, and we will more likely have superior long-term capital growth compared to option 1.


Thanks and keen to hear your thoughts on the above or any other options we haven't considered.