Small vs big block for PPOR in Sydney North

Hi everyone, looking for some guidance/ view.

I am living in Sydney west at the moment looking to move to areas like Pennant Hills, Normanhurst, Thornleigh, Hornsby, Asquith and Castle hill for good primary schools and non-selective high schools in case kids won’t make it to Selective schools.

I am actively in the market at the moment with the budget 950K to 1050K. I need your advice on what is the best out of two options. I know budget is limited but If I find one of the options within my budget, trying to understand what would be the best option which gives better financial outcomes without too much compromise on the quality of life and within my budget. And also looking to build Grannyflat when I plan for retirement/ financial freedom (in 10 years?) but I think it’s a long shot so not sure if I need to worry about this much.

Option1: Subdivided block (front or battle axe) ~ 500 square meters and maybe ~35 years old house or Villa ( no townhouse as I don’t prefer) for ~ 950K.

Pros: Low maintenance, better quality house compare to a big block of land with the old house, if I decide to move out of the house in future, less land tax (I have other IP in NSW with 400K land value)

Cons: less land content and may not appreciate as fast as the block with more land content (~700SQM?), strata if I buy a villa, no potential for a secondary dwelling if I plan for additional income with Granny flat in future (at the end of asset accumulation phase).

Option 2: decent land size content (~700 SQM plus) with the old house

Pros: High land content, therefore value appreciation, build secondary dwelling in future (in 10 years?) for additional income

Cons: High maintenance, poor house quality house to live with the family (possibly I’ll renovate to make it better)

 

In general I would go for the larger land since you have more space between neighbours and also some potential upside in the future.

You mention newer house as better quality. Newer yes, better quality debatable. Newer house softwood and plastic water pipe, older house hardwood and copper pipe.....etc etc etc.
Sure maintenance can be higher with an older house but even the newer house will kick in to higher maintenance at 10-15 years.

 

Long term the bigger land (assuming not some weird shape with lots of easements) will most likely outperform the smaller block.

Building a granny flat is one option, but the other might be selling (tax free) after your kids finish high school, moving somewhere cheaper and investing the difference? Fact is your are stretching for those suburbs and if you are in your 50s....

 

Agree with Trainee. But if you can't get that, (house on a normal block of land), the second option is the subdivided block. I would avoid the villa option if possible, because you don't get any flexibility and you really can't modify the property down the track.

Ideally you would target properties where you could walk to trains, but this would probably be impossible with your budget. (Sorry!)

 

Agree with both of you, hard to get a bigger land in all of my targets except Asquith. Participated in Auction last weekend and stretched up to 1.061 and left it. Other party bought it for 1.062. Its 942 SQM rectangle block. Things are changed post- election, suddenly prices have gone up. It seems I missed the boat while trying to catch the bottom.
I see some subdivided blocks in my range within my target suburbs, but they are 13-20 mins walk to the station.

 

Just thought on land value appreciation of bigger land. I might be able to increase my budget by selling my current PPOR in Sydney west but not sure if it's worth. I did a quick maths and hope it makes sense.
The bigger land costs ~ 250K more than small land in my target suburbs. A rough estimate to buy and hold bigger land for 10 years is ~120K. So it will be added to the cost base.
Additional stamp duty ~10K
Interest on 250K @ 4% for 5 years : 100K
Additional rates for bigger land for 5 years: 4K
Maybe the returns/ value appreciation is proportionate to the buying cost, whether small or big?. Maybe it's a good idea to invest that 250K on some low value and high yielding property in VIC/ QLD?
In my case, I already have IP in NSW with ~500K land value so if I need to rent the PPOR with large land content in future due to any unforeseen situation, I might be badly hit with the land tax.
So maybe small land with a decent house is a good option for me. I might

 

Thats your call but land tax if you rent it out shouldnt be a big consideration. The idea is that more land should mean more growth in the future, which offsets other costs. Possibly.

This is a common problem with newbies. Too much focus in the obvious and not on the less obvious. Like buying a car on the cupholders and roar of the engine, instead of things like service and parts costs.

Nobody knows what will happen in the future. But at least make decisions for objective reasons.