Overview: Three main methods of appraising property.
* The first and most common is the
comparison method. You need to find at least 3 similar sized blocks and find what they've SOLD for recently. Then you need to find at least 3 1000sqm blocks and see what they sold for. Compare the size of the land, the quality of the capital improvement and the location too. To do this you'll need to be fairly familiar with the stock in that area. If prices are undisclosed just call the agent who sold the property and they may tell you.
* The second method which is less common is the
summation method. Simply work out what the cost of land is per square metre in that area and multiply it by the lot size/s. Work out the total cost of what the house would take to build today and add that onto the total. The HIA (
http://hia.com.au/) has price guides on how much it costs to build houses/units. This data is available for purchase through the AVG but can be pricey.
* The third method uses the rent to ascertain price, but that's only really for commercial property.
If you want to learn more there is some information here: http://en.wikipedia.org/wiki/Real_estate_appraisal#The_cost_approach
(I've not read it so I'm not sure how helpful it'll be though.)
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Basically, your best bet is to get as many like for like comparable sales as you can and note these things:
Land Size: /sqm
Accommodation Quality: Poor, Average, Updated, Renovated, New
Location: Distance from CBD
Days on the market:
Listing Price:
Selling Price:
house.ksou.cn is a great free resource you can use for sales information but it's limited to NSW & VIC at this stage.
Once you've got a collection of data you'll be confident enough to decide if your aspirations are feasible. If you're not sure, I find plotting the recent sale prices on a chart/graph much easier to see and come to a conclusion on, ideally you'd want your price in the lower half of the range.
Before going through all of this research though you'd be best calling the local council and gaining an understanding of their attitude towards subdivision in this area, particularly with this lot. If there's already precedence set on the same street then you'll have an idea but talk to planning and get their opinion first. Never take an agent's word for it as they can just say STCA as a waiver.
Also before researching check the contract to make sure there aren't any encumbrances on the property that'd stop a subdivision such as an easement or single dwelling covenant to save yourself wasting time.
Remember that, depending on your area, subdivisions can take anywhere from 8 weeks to 24 months to be approved. Make sure you've budgeted for the time spent waiting, and have extra money for drafts people for any revisions that come down the path.
Make sure there's a substantial upside if you're planning on doing this. I usually aim for a 30% profit on paper to give anything a try and the real returns come out at 10% - 20% depending on the unforeseen events that can occur with builds. It's not a hard and fast set margin but it's a reasonable way to protect yourself.
Other steps you may have considered yet:
1. Tax Advice on the development from an accountant. CGT can ruin any profits.
2. Lending, make sure you've got pre-approvals for more than you intend on spending so you don't get stuck.
3. Legal advice, be sure to use a solicitor for these projects.
4. Architect/Builder/Draftperson - get quotes
5. Most importantly be sure you structure this correctly, a financial planner is a good option here as sometimes accountants just look at tax rather than future aspirations too.
If this sounds like too much work you could save time and pay $500-$2000 for a feasibility study.