How to determine if a site is feasible for development

How much is it going to cost to subdivide?

Are you going to subdivide into torrens (green) title or community title? Community title will be $5-10k cheaper. and really makes no difference Unless they both have street frontage then torrens is worth the extra money.

How much are you going to spend to rebuild the two new homes, What level of finish ?

How much does demolishing cost ?

If you plan to keep both, how much is the rent going to be for both? Can you afford to keep both

Work out how much you renovation would cost. How much would the front property be worth after a reno and after removing the land at the rear.

Write down all your end values, Write down your costs, write down how much capital you require for both option and also write down the amount of time required for both.

even though for example renovating and building one at the rear say might make a potential 100k. If demolishing and rebuilding 2 made 80K then you have to factor in your time and effort. The effort of rebuilding two houses can be conducted over the phone and email. Whilst the effort of managing a renovation might not be worth the additional money.

Hi melb investor.

I'll be frank so I don't waste your time.

On those numbers I would not go ahead. 

Your outlaying  over a million to make a 40k return. That really is not good enough.

you also have to consider holding costs interest on the initial property 

interest on the construction loan

rates water taxes power whilst not being rented.

also sales costs of a minimum of 2.2 % even if you intention is to hold. Because you require several backup options.  There's just not enough fat in the deal to justify that amount of of outlay. 

Also  as a gross yield of 4.9%. That is very low for a developed solution. My honest opinion is  you need to focus on your product. 550k got building 2 x4beds is a 1/4 million a house plus builders profit . 

Too much risk not enough return. You'll lose your. Potential 40k profit on any number of unforeseen circumstances. 

Have you considered a subdivision and then simply sell the parcel of land instead of constructing a house yourself?

You could potentially use the profit from the sale of the land to buy another property (as long as it doesn't devalue your existing property as there will be less land).

That way you could avoid all the construction costs and headaches and just buy another property with subdivision potential?

Food for thought.

Dear Melbinvester, 

If you have 763 sqm in Wantrina South, Which is a good are in Melbourne. I think you might squeeze in 3 properties. I was having a discussion with a Councilor from other area in Melbourne. They advised me, some changes are going to come 1st July 2014, Which might entitle you to put three properties. 

Please talk to a good town planner in the council. Making a visit to council office worth a shot. 

Thank you. 

Creating income streams will net a higher result long term then buying income streams. Good development can return great equity gains and positive cashflow at the same time and is repeatable. Purcashing 100,200,500k below market value that has a positive cashflow is less repeatable.

Melbourne investor. 

– why do people do subdivisions? 

– if you could subdivide your block into 2 allotments it's going to be worth more in total then just a single block. If you can subdivide into 3 blocks or more often it is worth more then the 1 block or 2 blocks. 

Just like a piece of pizza buy itself costs more per unit then the equilivent piece when you buy the whole pizza. 

The individual slices sell for more then the total. Same applies to housing. Unless there is not a market for the resale of the proposed 3 block subdivision. 

Highly doubt it in Knox shire, or most others, perhaps 3 cubby houses not units or townhouses