Inheritance! TO develop or not to develop?

Hi all, complete property development virgin here,.
I am in the unenviable position of inheriting my mother's house with my sister. There is no mortgage and we are just about to start probate. The house was bought by mum and dad in about 1960 I think and both have now passed away. The house was built in the 1920's, double brick and of no architectural significance, between Parramatta and Blacktown. The block is 697 sq.m. with a 15m frontage. Worth about $1mill as is, and a likely knock-down rebuild although I will get some opinions on repair costs.
Now we just have to work out what to do with it. We could sell and take half the money each, however I would like to explore other possibilities before deciding. I could feasibly buy my sisters half and develop myself, new house, duplex, granny flat etc. etc.
At the end of the day it will come down to the maths, construction costs/tax implications/fees versus potential gains depending what is to be done with the end result. ie: sale price/rental income.
I am 60 years old, married but seriously short in the superannuation dept so there's that to consider as well although right now we are still able to get funding for a project if necessary.
Any and all advice welcome as well as tips on finding online resources to help would be greatly appreciated.
Thanks in advance.

 

No testamentary trust in will?

 

One main asset, the house plus contents. Nothing valuable and the will states everything divided equally between my sister and I, we are also both the executors. So 50% each. First time doing this so please explain all terms no matter how simple.

 

Property is a long term game. If it was me and I was 60 it would be sold and $$ put into super. Are you working? What’s your retirement plan? long term aim?
Unless you want to learn about property development it’s not something I would take on at 60. Better if 50 or longer. Enjoy your 60-70 years.

 

Given the type of development thats possible, i'd lean towards selling land as is.

Simply, the numbers and market conditions for building duplexes as an investor right now aren't the greatest and generally don't yield a productive enough payoff.

 

Currently about $120000 in super courtesy of living in the UK for 20 years (no compulsory super), a messy divorce that cost me all my UK home value gains, so came back to Oz 12 years ago to start again. Still $400000 left on my mortgage here, and about $150000 in offset savings. So the $500000 from the house sale would pay the mortgage, leave me with total $250000 in savings and $120000 super. Just trying to get ahead and be comfortable in retirement rather than have to work until I'm 75...

 

I did a quick calculation based around rental values in Northmead, which seems fairly local to your parents' place. The suggest that you'd probably making a small loss renting the property out if you borrowed $500K to buy your sister out. If you want a retirement income, that's probably not the best option.

Would it be worth selling your house and moving into your parents' old place?

I'm not a financial advisor but selling the house and taking the money makes sense to me. You could drop a big chunk of it into your super fund. You could use up any unutilised concessionary caps from previous years, and get a bit of tax back, along with non-concessionary deposits of up to $110K per year (I think). That would also put it out of your reach, so you can't spend it on other things.

I would also look at making voluntary NI contributions to the UK. I think that you need thirty-five years to qualify for a full pension (about $400 per week), and you can currently backfill for the last five or ten years because the government is short of cash. You'll have paid twenty years during your stint over there, so you could play catch-up and have another income stream in retirement.

 

If you think you will become a millionaire by developing you will face a tragic reality. Aftre income tax (yes), GST and the hassles of things going wrong its invariably the case you will likley lose or make very little. Unless the land is so big you possibly cant afford the scale of development. Just sell it and use Mums legacy to good effect. Super could be a sensible way to shelter its earnings from tax etc but discharging your own home loan may be wise too. Mums legacy will be far more effective to discharge debt and bank it for retirement than putting it to risk on a speculative property matter you possibly lack the funds for. Sound svery much like a "deceased esate sale" property. Someone who buys it can demo and make their own choices. Spend nothing on it other than a mow. Local agents love these land sites. But before you do speak to neighbours to see if they also have ideas to sell up. 2-3 lots can expand the area and value. Then speak to a few developer savvy agents. They can help sell it for its best value as a site

Some basic financial advice to steer you should be considered.

 

$1 million sounds cheap for a brick home in Northmead. I think there is nothing much under $1.5 million. If it’s 1920s it should be a California bungalow design which is in high demand in that area. My experience is that 60% of developers lose money on their first development over having sold the land and invested the cash elsewhere. The profit is in the learning.
Get two or three agents to give you an opinion of what they would do and what the property would sell for now. Every 1st development costs much more than you expect and takes longer than you expect but teaches you what to do better for next time. You need the borrowing capacity for more than you imagine and to keep the loan longer than planned.
If developing was easy, everybody would be doing it, but a few end up losing their shirt when starting with a fully paid off home and looking to make a few hundred k by borrowing a million dollars.
Be careful with agents in that area, some younger ones will quote high prices and then lean on you that the market has come down so you must meet the market. There are great agents who have worked the area for 20-40 years who will be honest and quote a fair price based on knowledge.

 

Don’t take this the wrong way, but once I saw you write you are 60 forget developing. Not worth the stress at that stage. It also may be the only one you do as well so there will be no knowledge benefit for future developments.

Sell well and seek good advice for Super is what I would do.