Hi,
I would like to find out if a block of land in Perth has profit potential. Its on a corner block on 864 square metres and zoned R60. The local council has said that you could build 5 units. If I bought the land for $680,000, demolished existing the existing house, did the development and sold each of the 5 units sold for say $370,000, would there be any profit in this deal? And if so, how much profit roughly?Thanks :-)
Hi Gavin,
The average lot size for an R60 is 150m2, with a minimum of 120m2, so the council is correct, the theoretical maximum is 5 units. Reality will depend on the block shape and what the market wants. Just because you can get 5 on doesn’t mean you should. At 150m2 including driveway, you are left with something pretty unappealing to a majority of the market. You will also have to be in a premier location to warrant the smaller lot size.
R60’s are generally better suited to multiple dwellings (apartments) on a site of this size you can get 6-7 2 bedders on it. Once again you will need to check that there is a demand for them in your suburb. Perth is well and truly oversupplied with multis in average suburbs, eg Hamilton Hill and Rivervale.
I would also check if you have a split zoning eg R20/60. You will need to confirm that your site and design meet the council requirements for the higher zoning.
You will need to undertake a feasibility study to determine if your development will work. You will have to provide more information to answer your question, eg sewer location, water location, is it a flat and level block, is soil conditions (Gonsells loves soil replacement at the moment) are developer co-contributions required? is there a house on the block, does it have asbestos?
Finally you will need to select the right bank before making your offer.Very few are willing to go into a five unit development without being in commercial lending territory.
Short answer is get an expert on your side. The costs of getting it wrong are very high.
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