My husband and I, purhcased an IP a year and a half ago. This was a fibro 4 br cottage on a nice block of land. The house needed some reno if we were to go rent to good tenents. So we spent around 5k to renovate the bathroom and paint the place. (we paid $450k for the house) This is 15km from sydney cbd and with good transport and adjacent to booming suburbs. We bought it for the purpose of knocking down and building a duplex eventually. At the moment it is rented for 400pw. Since we bought it a year and a half ago prices in the area have increased and I think it must be woth around 520k now. This comes with a land size of 720sqm and a 19m frontage.
My big question is, although we really want to go ahead and build the duplexes, we are worried to take another loan for $450k at this present time. The reason is we are not sure if the house prices will plummet.
In the last year when interest rates were going up, prices in this area was going up say around 7%pa. Would there be big price drops in areas like this, if things get messier in the economy?
Can anyone suggets if we should consider selling this or to hold?Opportunity
If it was me, I'd be factoring in the worse case scenario. I've already been in the OMG I am the only wage earner in this marriage (so also went and got a 2nd job) and then I was having to consider what if neither of us were wage earners if the economy ended up going belly up. It wasn't pretty but at least I found a solution to enable us to get past the possible worst case scenario for a while.
If you could get in and out of the deal within 8 months it might work well for you. Pretty sure some of the more experienced developers and investors here could give some interesting feedback.
What are your building costs?
What are the earthwork costs?
What are the demolition costs?
What are the subdivion/strata title costs (if any)?
What do you owe?What do you estimate the value of the buildings will be worth if the market drops 5%? ditto 10%? Does the value post construction put you in front following the costs that will be required to build the duplexes? It's all about the numbers not the theoretical value in the next boom. You must have an exit strategy where you break even as a worst case scenario.
With falling interest rates it may be a good time to develop however, building costs have gone up a lot recently
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