Renovate or rebuild?

I currently have a property in Gladesville the inner north-west of Sydney, 10km from the CBD. It's a 4 double bedroom fibro house with a granny flat out the back. On a 700m block, decent enough house... But lets face it, it's nothing flash, kitchen and bathroom are aging. It's nearly a century old and single storey, flanked on both sides by double storey duplexes which are relatively new, and new houses are popping up and down the street. Though it is much nicer than this house, which had the locals stunned: http://www.propertyobserver.com.au/...t-way-below-actual-selling-prices-realas.html

A change in recent family circumstances means a sale is inevitable. Which got me thinking about how I can best capitalize on this. I'm considering spending up to $450k to knock down and rebuild (~180sq 4 bdrm, 2 bath, double storey, LUG, landscaping etc) Then immediately or very soon after put it to market, hopefully for well in excess of $3m.

Realistically this means that I would be paying anywhere from $300 - $400 per week (depending on how much I need to borrow) to service a loan for potentially up to 9 months until the house is sale ready. That's do-able, just, but I would be living on a very tight budget.

My biggest risk would be that I could run out of money before the project is completed. That would be worst case scenario.

A smaller risk, but one worth considering is that I could make a smaller profit once I've paid off the loan compared to if I had have just spent say $50 or $100k on renovations and saved a lot of headache. Or even sold it as is, but with a DA approval.

So I suppose my questions are:

What would you do in my position?

Do the sale of brand new homes work in favor of vendors or are buyers wary of them? (costs being cut etc)

Whom could I speak to to get professional advice on my options? I presume the first step is I should have the property valued as it is. Do property valuers offer hypothetical valuations in addition to "as-is"?

Cheers

I'm thinking that rebuilding would take too long and cost too much and reduce your market. May be perfect for a developer or renovator. Let the buyer decide. Sell as is now in hot market.

Developing it sounds like to much of a stretch and is much riskier.

Spend enough to get it to an acceptable level for the area - don't just rely on it going to a developer / renovator - so you appeal to the broadest possible market.

Agree that you should plan to have it on the market next spring.

Thanks guys. I'll look into getting a valuation ASAP.

Cheers

The one in the link had a mixed use zoning therefore it attracted the very high sale price. Can you put a dual occ or duplex or subdivision on your land? 700sqm is quite a good size. At worst put a granny flat out the back.

Gockie said:

At worst put a granny flat out the back.

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I believe there's already one there.

Smasher said:

It's a 4 double bedroom fibro house with a granny flat out the back.

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I'm not sure of the market in that area, but my 'gut' tells me that you'd be best making it look as good as you can for as little as possible & let the new owner deal with the possible knock down & rebuild. With the market as heated as it is, someone might just pay you a lot more than you expect.

Gockie said:

Can you put a dual occ or duplex or subdivision on your land? 700sqm is quite a good size.

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I've thought about this. I called Masterton homes, person there told me over the phone that as there are duplexes on either side of the property the council wouldn't allow me to split the title. A duplex on one title will be very difficult to sell in my opinion.

Yes, that was just one persons POV, and it was 2 years ago now. The reason I didnt follow it up with a call to the council or a lodgement of a DA is that I would need somewhere around the ballpark of $650K for the project.

The newer duplex next door is renting @ $800pw for each side. More than enough to cover P&I loan repayments, but the trouble is that I couldnt afford to cover just the interest repayments in the 6 - 9 months before they are habitable.

skater said:

I'm not sure of the market in that area, but my 'gut' tells me that you'd be best making it look as good as you can for as little as possible & let the new owner deal with the possible knock down & rebuild. With the market as heated as it is, someone might just pay you a lot more than you expect.

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My biggest fear is that I will sell it, only to see somebody buy it, put a dozer through it, and then put a new dwelling back on the market for a tidy profit and I'll be kicking myself for the rest of my life.

Will the market be just as hot in 2 years time? I suspect so. Cashed up Chinese migrants love that area.

To make a tidy profit the buyer will need to do more than just putting a dozen through and building a new dwelling. Is there some development potential - if you can get an approval for duplexes etc than you would maximise value. Suggest you chat to a town planner.