My wife and child and I are extremely happy, renting an awesome big house (room for our growing family etc) on a mountain-side, views galore, place in Heathmont, VIC.
But we came across the chance to purchase a great little place across the suburb in Heathmont's 'Golden Triangle' back in July, on a 4 month settlement….
We are about to settle on Nov 1, on this old, small 3bed (plus FSC granny flat) weatherboard home in Heathmont, VIC.
It needs a minor cosmetic renovation (only $8K, thanks to eBay and elbow grease!) to for us to live in or rent out.
It is set to the front of a 700sqm block, with 3.8m driveway access on the side for rear access, but has 2 huge native gumtrees right in the back corners of the backyard, the only down-side……
Classic ugly house on the high-side of a pretty street.
200m walk to train station, 100m from cafes etc
Our ultimate goal from this – our first purchase – is to use it over the coming 2yrs, in the best possible way, to give us the largest return (lumpsum 'kitty-builder' profit) to set us up for our future investments, family home, looking after aged parents etc…..
Now the options……
We currently rent locally @$1900/month (and are extremely happy staying here if need be), and save another $2800/month right now….
Mortgage payments on the house we bought will be $2400/month starting in November.
TO MAKE THE LARGEST KITTY-BUILDING PROFIT, do we:
a) do the quick cosmetic reno, and rent it out (negatively geared
) at $350/week + granny flat for $80/week for a few years while we stay where we are currently renting, and build up our savings again (plus expect some capital growth as added equity) to reapply for another loan in mid 2015 to demolish and put a 2 x 3bed/2bath development on it…..b) do the quick cosmetic reno, live in it, paying the mortgage down and building equity etc, to reapply for another loan in mid 2015 to demolish and put 2 x 3bed/2bath development on it…..
c) do the quick cosmetic reno, rent or live in it, while subdividing and selling/developing the backyard as just battleaxe block sale or with a 1 x 3bed/2bath home…..(however council are not initially happy to approve this, having looked with them at aerial shots of the block and the canopy gumtrees I mentioned being where they are)
d) none of the above, because you have better ideas!
We would love your thoughts on this situation.
SirDangerMouse.
Hi SirDangerMouse
First and foremost is important to be aware that it is not necessarily guaranteed that you'd be able to get finance for a demolish and rebuild venture. It is important to look into this from the perspective of whether you would qualify for such a loan from a serviceability perspective, and whether a lender would happily finance it. Perhaps they'd be unhappy lending you a big pile of money only to have you then demolish the only dwelling on the site.
Assuming you could finance it, then the option you should take is (and please try not to laugh too hard when you read this), is the one that makes you the most money via the path of least resistance. Cut the numbers to understand the costs, timeframes, and likely profits of each option.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
) at $350/week + granny flat for $80/week for a few years while we stay where we are currently renting, and build up our savings again (plus expect some capital growth as added equity) to reapply for another loan in mid 2015 to demolish and put a 2 x 3bed/2bath development on it…..
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