G’day Forumites,
I was asked the question today whether the financial institutions would value a vacant residential block at a higher amount if planning approval is obtained to strata title the block from 1 to say 3 units. My answer was “Yes” but what do you think? The block is in Perth and the owner does not want to develop or sell the block but does want to use the equity to obtain finance for an IP.Pud
Valuers will assess and make their remarks and Valuations along those lines, but it is still a vacant block of dirt at the end of the day. Doesn’t mean you can’t use it for equity though.
It makes no real difference if it is worth $150k and only owing $50k to the bank it still has $100k equity same as a house.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Thanks for that Stuart.
What sort of increase in value do you think would be obtained? I’ll see if I can find what suburb the block is in.Pud
It depends on the D.A. which has been obtained for the block. It is generally of most value when selling the block to someone who wishes to develop it, but there’s no harm in trying I for one will never die wondering thats for sure.
Speak with a Broker when doing the re-fi and they should be able to get you close to the money you need, if they are any good of course, and also assuming your friend isn’t chasing $5m for a $10k block of dirt. Location is important but can be worked around as can most other issues. If you would like to discuss further please feel free it would be a true pleasure to assist if I can..
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Thanks again Stuart,
After some probing the relevent information is as follows….The property is not a vacant block but rather a PPOR in the suburb of Queens Park which was purchased in September 2005 for $265000. The question now posed to me and to the forum is…
If the owner receives approval to build say 3 residential units would the increased equity be worth the expense given that he does not intend to develop or sell the property? This is just another (creative?) way to add equity to borrow against to fund an IP.What does the forum think?
Pud
I now have to question the logic of spending the money getting the draftwork done along with the cost of the D.A. Application?
Perhaps I missed something somewhere along the lines, but I would think the money would be better spent on the new I.P.?
If I did miss something could you please explain it to me?
If on the other hand the owner was to complete the D.A. he could then take that and obtain funding to construct the units based on gross realisation if the lend was established correctly.
The end benefits including the equity he would then have to play with would be well worth taking the project on. That would be an awesome first I.P. I think
It would take a bit more work, but the end result and the fact the Block is currently PPOR would give far better taxation benefits and have a lesser CG implication down the track depending on how long the property was held for. But he would really need to speak with his accountant in relation to these benefits and if they apply as should every one else this is only general advice and not tailored to anyone person…I would still have a crack at it though if the client were to ask me to try for them though. How much deposit did your friend purchase their home with? They may have enough equity now to kick off their investing career without the rigmarole and hassle of the other…
One just never knows till they ask the question.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055The property is not a vacant block but rather a PPOR in the suburb of Queens Park which was purchased in September 2005 for $265000. The question now posed to me and to the forum is…
If the owner receives approval to build say 3 residential unitsHi Pud,
In principle you seem to be on the right train of thought with this line of thinking. If your friend has no intention of going down the development path with his land, then to extract the maximum equity, one would just need to provide the Valuer with ;
1. A map of the area showing the exact area of the Lot
2. The exact frontage available to the Lot
3. A copy of the zoning for the areaIn all honesty they should be doing those tasks anyway.
You’d probably be surprised to find quite a few of the forum members actually own identical properties to that which you describe…..a single house on a Lot in Queens Park. Having spoken to a few, they are all of the same opinion as your friend….just keep on sitting on the land and do not develop. Growth is in the dirt right ?? You’ll get this by doing nothing…so why not…..or….Spend a whole bunch on units and attract some “also ran” tenants, and hope the nett rent after all costs cover the loan on the construct.
I’m with your friend’s line of thinking.
The Canning City Council, the local authority, has various zonings in the residential zone, the two most common being R17.5/30 and R17.5/40.
Regardless of the land zoning and the area of the Lot, unless the frontage of the Lot is wider than 25m, they will never allow you to place more than 2 dwellings on the Lot. There are many houses in and around Wharf St on half and full acre Lots. However they were all squeezed together like tin soldiers, with 20 to 22m frontages, going back about 100 or 120m…..no good to man or beast, unless you can pick up two Lots, side by side.
Most of the Owners either fenced it off and forgot about the back half, or simply ran flocks of sheep of all things…..pretty weird to see in 2006 and only 10 or 11km from the Perth CBD.
Looking at the stats, he’s getting pretty good growth – so good luck to him.
Cheers.
Thanks again Stuart and to you as well Dazzling,
I’ll pass your information on and see what happens. I’ll update you as to the outcome when it happens.
Cheers,
Pud
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