WA analysis paralysis!

If they built it for that much, then they way over capitalised in Bedford, evident by the $1.075m sale price.
The market determines the price, not how much it originally costed.

 

Of course they overcapitalised, that's not in doubt. It's an example of how ATM you can buy significantly under replacement cost, in between areas or a better property in same area, than if someone built themselves.

In this case, even people building fairly average 4x2 2 storey homes in say darch would not be spending a lot less than the purchase price here, to be in a far inferior location, in a worse house. I'd be surprised to see more than 150/200k difference but in some cases maybe even less

 

I understand this argument. Let's stick to Bedford and run a buy vs build analysis. The block for 163 Shaftesbury is 492m2, street front.

There is a 492m2 block on the market for $465,000.

reiwa.com - Lot 22, 226 The Strand, Bedford

Fees
Mortgage: $165.80
Transfer: $255.80
Stamp Duty: $18,002.50
Total: $18,424.10

That already brings us to $483,424.10

Let's build a more modest house (300 sqm) and give it a low end finish. According to BMT that would come in around $527,250 but let's say we did it on the cheap for $500k.

Total build is $983,424.10 for a low end townhouse at 300 sqm.

Or 163 Shaftesbury Ave is $1,075,000 + $47,019.60 in fees = $1,027,980.40

The difference in price is $44,556.30.

Sure my new build is cheaper but it is also 150sqm smaller and a low end finish vs a high end finish. Complete waste of money.

You could argue the block is overpriced and it may be. But it is the only street front block on the market in Bedford. Drop $100k off the price for arguments sake. You could also argue the build cost is overestimated and it should be $400k. Sure, let's run with that. New total price is $783,424.10. Would I get my money back on a $783k low spec 4x2 townhouse in Bedford?

Why not buy a 4x3 medium spec for $749k?

142B Drummond Street Bedford WA 6052 - House for Sale #124425082 - realestate.com.au

Finally, per square metre cost. My new 4x2 is $2,611.41 per square metre of building (including land cost).
163 Shaftesbury Ave is a 5x3 at $2,279.34 per square metre of building (including land cost)..

To me, the numbers for 163 Shaftesbury Ave are way in front of building on a street front block.

 

Thanks for your input. I don't disagree that that was probably a good buy for what you get. I just can't fathom a $1.1m build in bedford.

That must be some ninja magic there.

Ummm... yeah. I wouldn't call that a medium spec. 230sqm rear townhouse. Fittings look pretty average to me.

 

Me either. But I have been running numbers on a build that is 450m2 under main roof. The spec is above average. At $2,000 per square metre, that is already $900k. I think you would be lucky to get that house for $900k. It's still way over for Bedford and the sales price reflects that.

or a lack of proof reading!

Looks average to me too but it does have a lot of upgrades.

The 163 Shaftesbury house in comparison is street front, nearly twice the floor area, bigger block, high end finishes. You get so much more for your money.

 

Thanks @Ross Forrester good advice. I have heard this before and will be seeking multiple options before going ahead for sure.

I haven't found a property investment savvy accountant yet

 

Hey @nambis thanks for the tip. The book was "my 3 year olds guide to property investing". I'm a newbie and I found it works with my personality, step by step, lots of easy to understand guides etc. since then I've become obsesssd with podcasts, find it easier to take in and works well with my job.

 

Tha

thanks @Westminster, good advice. We are going through a lot of what you mentioned at the moment to create a longer term plan.

 

Sorry, the book title is my four year old the property investor haha

 

If you are set on buying in WA (or anywhere), then I reckon the property values and rents have a while to slide down some more so you have time to prepare. Prepare on paper first.

1. Choose - are you investing for capital gain (precisely how much) or for rental income (positive income). Will you develop or rent and hold?

2. Choose the 3 suburbs that meet your plan.

3. Get to know those suburbs intimately. You should be able to predict the sale prices of the homes as good as a real estate agent. If you want to renovate to sell or rent, pick a house, work out purchase price, cost to do the reno / development, and then look at the final cost versus the result you needed to make a profit or get good rent. Do they work? Go look at the cost of doing kitchens and bathrooms. What is the difference in the sale of houses between renovated and renovated houses.

4. Work out the maximum you would pay for a property. Save 25% deposit for the new place in the offset account of your home loan.

5. Ensure your home and the Bunbury loans are not cross securitised. If they are and you are unable to make repayments, you could lose both properties (yes your own home) so get them uncrossed if they are crossed. Just go to your bank and sort it out with them directly.

6. Once you have 25% of the value of the new place saved up in the offset account, then you are ready to buy financially. It would be great if you had 5 years holding costs to cover any negative shortfall.

7. Ensure your Income Protection Insurance and Disablement Insurances are in place.