- Posted 23 Sep
- 0 Comments
Home owners always hope their properties increase in value, and in today’s market there a good chance that your home will be worth more when you decide to sell. But what if you could engineer a sell off that would net millions for you and your closest neighbours? Take a look at how a few successful families made it happen.
The trick used by six McKinnon home owners was to combine their land offering to make the plot appealing to commercial developers. These six families, located in a suburb southeast of Melbourne, decided to put their properties on the market together as a 3,000+ sqm site that could support an apartment complex. The combined land sold for more than $8.8 million and the families split the total for a huge profit.
The lots were very well situated within walking distance of a rail station and multiple local shops and the price averaged out to a little over $2,9000/sqm. Although this is an impressive example that has made headlines, average home owners can potentially copy this model. Real estate experts predict that an average seller can expect a 40 per cent increase in sales price if he is able to offer a larger plot.
Right for you?
If the location is right, developers are willing to pay a substantial premium for property they can use for multi-family units. Obviously these opportunities are dependent on council building and zoning regulations as well as other factors.
First, you’ll need to get on well with your neighbours and convince them to cooperate in the sale. The best plan is to agree up front on what percentage each neighbour will get from the profits. Specialty real estate firms offer experience in combining properties for higher profits, and it helps to bring in an independent advisor to deal with legal and financial issues that may come up.
Understand the risks
Property investing is never a completely secure deal, and pulling off this kind of windfall involves taking some risks. Before even considering this type of collaboration, you’ll need to extensively research your neighbourhood’s zoning restrictions. If the laws won’t permit the type of high- or medium-density building that developers want, there may be no benefit to grouping properties together.
The next hurdle is convincing multiple neighbours to relocate and sell their property at the same time. Experts agree you need at least three contiguous lots, and more land is usually better. The combined plot needs to be large enough to accommodate multiple units so that the developers can reap a return on their investment.
Developers usually only care about a site, not the homes that are currently standing on it. So if participants are unwilling to split profits equally, the valuation should be based on the size of each family’s land, not on the home they are selling.
If the deal falls about due to disagreements among the owners, no one reap the benefits. This is where an advisor can help. But if you or your neighbour decide not to sell and the deal moves forward anyway, remaining home values may be negatively impacted by the prospect of a large apartment building in what was once a typical suburban neighbourhood.
All of these factors make this type of land deal a difficult feat to pull off, but if you have the right zoning and can get everyone to agree, your home may be worth millions.
Australian Credit and Financing has helped thousands of families get the mortgages they need to buy the homes they desire. Contact us and let our home loan experts answer your questions.