Should I Stay or Should I go

I'm in a quandry.

The situation is this: we have a 4 bedroom, 2 bath house with a 2 bed self-contained flat on a double-sized block with 180 deg ocean views and 400m from the beach. It has a small garage and a 'workshop' carved out underneath. It's conservatively valued at $580,000 although we might get 620 or more. There is no mortgage on it. It's been the family home for nearly 30 years. My parents live in the flat, which is part of the deal with us getting the main house rent free.

We have neighbours all round but none have ever complained about the noise. The one on the downhill side is closest to the shed but she's a 'summer resident' who is only there for a couple of months. Generally, the sound of the surf drowns out all but the loudest noises.

Lately I've been thinking that it would be great to have a few acres around us. A bit of a buffer between the neighbours, room for a big shed, timber rack, space for the kids to run and jump etc. We could get 5, 10, 20 acres within 10 minutes of town. Some places are developed, some are new farm subdivisions.

If we bought land, we could build the house that we wanted but we'd need to store everything and rent for the duration. We could build a shed first but it would be so full of furntiure and belongings, it would be no use to me for the duration.

If we bought a place with a house on it already, unless it's brand new we'll probably want to spend money on it, plus we would need to build a 2 bed flat for the parents to live in. It might already have a shed.

Land goes for around $180-$230 thousand. I have no idea what it would cost to build a house. I know what the going rates are but I'd be building it myself with a fair bit of help from mates/family. A reasonable block with a 3 bed house and a shed goes for around $400-$450 thousand.

Stamp duty, real estate and solicitors would be around $50,000. We need to spend about that much on our current house over the next couple of years because it is in a bad way. Needs a new roof, a new kitchen, major structural work underneath to fix bodgey work of previous owners. If we sold it, it would most likely get bulldozed to make way for units, so any money we spend on it now would go to waste.

What would you do?

Bulldoze your current house, build the units yourself, keep one so you have a beach house, sell the rest, use the money to buy your land and house.

"Cause you'd have to rent while all that was happening....

A very cunning plan, Baldric, with one tiny flaw: we have no money :(

I thought of trying to find a developer who would build the units. I would provide the land and we would work out some equitable arrangement when they sell. The trouble is finding someone we can trust...

Do you know/get on with any of the builders in town?

They might be interested in going in with you.

Also, I understand that Banks will lend you money if you have collateral :rolleyes:

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Originally Posted by silentC

A very cunning plan, Baldric, with one tiny flaw: we have no money :(

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That's usually not much of a problem. With your land as a security, you can, probably, get financing for such a project. There are, however, two questions. The first is whether the expected profit is high enough to cover the cost of the money, and the second is whether you are willing to take the risk. If the real estate market colapses in the next year, you will end up much worse than you started.

We've got about 3 tame builders but none of them are speculative types. We could probably find someone who would be interested in building on spec.

I was just talking to the real estate agent (going to look at some blocks). Asked him what he thought and he reckons it would be a bit risky here in the current market because we might have trouble selling them. The boom has ended here and there are a few properties on the market. The cheap ones are getting snapped up but the 'premium' properties are not moving. People want/expect too much for them but no-one wants to pay.

Our place would be worth over a million in Sydney :(

Javali, that's pretty much what the agent said to me. We might not sell and if we do we might not get our money back.

Craigb is on the right track!

Dont worry about not having the money, you own the land outright! Use it and talk to your bank, or a venture capital mob to provide the financing if you can build the units yourself. Friends family etc are also good to get funding....just make sure its not done over a handshake!

Personally, I'd go into a joint venture with builder. Just make sure your lawers are happy with the agreements.

Another option is why not hang onto the house, use it to finance the new place then rent the old one out. With it being so close to the beach and with views, I would be inclinded to hang onto it for a while longer until most prime redevelopment sites are gone, then you can sit back and enjoy some real capital gains.

Just my 2 cents worth...Actually best idea is get some professional advice.

Silent,

My sister lives on the south coast (an they also own a real estate agency) - too bad I hardly talk to her (thats another story).

They have bought a few places and developed (Milton, and currently Malua Bay - of which they live(d) in). These have been acerage - must have somewhere for the horses.

Their biggest problem was and still is getting builders and tradesman. Apparently its all about lifestyle there - so if the surf is good then thats where they are not working on your house. As the coast is the Canberra seaside I have heard many stories of people that have built/developed etc have taken Canberra builders there to overcome this.

It may be different in you area and you seem to know some builders.

BTW I agree that the current coastal boom is over.

Cheers

When did a house stop being a home and become an investment opportunity.

Surely your first priority is to decide what sort of lifestyle you want to live in and then see if what you have can help you afford it. Money should be seen as the thing that helps you get what you want, not an end in itself. Everybody seems to go about it the wrong way: don't over-capitalise, get the best return for your investment etc. If you speak to a professional they'll just advise you to to do the most money making approach. Dceide what you want first and then you can involve a professional to see how you can afford to get it.

Simon

The problem with trades here is more that they are flat out. My brother in law is a subbie builder and the guy he works for has 3 years' work on his books. We have three major 'estate' developments going on in the area. These are all baby boomers and sea changers. They sell up in Melbourne or Canberra, buy a block of land at 'Mirador' and build their dream home. My BIL has been working at Tura Beach for 5 years non-stop. His most recent job was about 8 townhouses in a 55 or over 'complex'.

Still, we don't have too much trouble getting things done. We have a few connections but it's usually done after hours, in between jobs or on weekends.

Simon, you're absolutely right and this is the way I look at it. However there are a number of alternatives to help us get there. What I want is simple. I want enough room to do what I want, I want my wife, kids and parents to be happy with where we live, and I don't want to be in debt for 30 years to pay for it all. Might be a tall order. I mean, all the other stuff is fine but the wife happy?? :rolleyes: :D

Silent, another tough one from you mate. BUT don’t forget that you don’t have a mortgage at the moment and that is a good start. Good luck mate.

Real estate is doing it tough at the moment. I know because I have been trying to sell my house. I should get a result in the next few days and will keep you guys posted.

SIlent, so keeping the wife happy is either your No.1 priority or you just write it off as unachieveable?

Your objectives seem to be:
1. Nice place to live with more space than you have now
2. Family to be happy in their home
3. No significant debt

Your options are:
1. Buy land and build
2. Buy an established house
3. Stay where you are and renovate
4. Redevelop the existing land

The resources/contraints you have to deal with are:
1. Peace of mind of the family during the move/construction
2. Accomodation for the oldies
3. Availability of reliable developers/builders
4. Finances
5. The time you expect to spend in each place (ie is the next place going to be for life?)

The significant factors I can see in this are:
1. You want to avoid debt rather than make money
2. The current place just isn't up to the mark
3. You don't really want to renovate the current place
4. You probably really want to build a place yourself but wonder if your marriage will survive it

If I could put myself in your shoes I think my suggestions would be:
1. Decide first if you could stay where you are. If it would cost $50,000 for everybody to be happy with the current place then borrow that and do it. I know that if you end up selling then that $50,000 will appear to be wasted but if you lived there for 10 years (or more) then that would be just $5k per year. People may say you are over-capitalising, but if you enjoy living there - so what, people spend much more than that on luxuries that are next to worthless once you own them.
2. If you really want to move, then have a realistic discussion with the family about building a house. Seriously consider the effect it will have on your family life. Also consider the health of your parents - will extra stress cause them problems.
3. If yoiu want stress free, then buy a place - if you think you can cope then go and see a professional about how to finance a new property.

Simon

SC,

Be careful when looking at blocks, try and restrict yourself to Real Estate windows and newspapers. If you eyeball the ideal site at the right price you may be tempted to jump in and sell you house after, this might work out but would be extremely streeful even if you get an agreement for a long settlement on the land.

I would work out roughly how much I needed to spend on the land and house then determine the minimum you would need to get for your existing house to get what you want. This is the first hurdle, if you have money over then you know what you have to play with in terms of improvements / additions. Having the time you need to sell when the price is right makes the exercise a lot less stressful for everyone.

I'm assuming this is a move you're intending to make for the next 10 years plus so waiting for the right buyer for six or even twelve months shouldn't be a worry. Also think about how you market your place, consider advertising in Sydney particularly out west where people would love to live that close to the beach for $580K.

I know what it's like and I've failed to take my own advice on this one before, when you make the decision you just want it to happen, I don't know if you're the impulsive type but if you are try and restrain yourself. Also when you get to buying the block go in hard with your first offer, don't be sucked in to "The owners a lovely old man looking to retire....." you need to do the best you can for you and yours..

HH.

Carefully consider the work that goes in to keeping up with 5, 10, 15 etc acres of land. No good having a huge shed if all you have time for is mowing/gardening etc. IMO 2 acres is a maximum if you are not going to use the land for some sort of crop or herd.

On the other hand, 5 acres would lend itself nicely to three or four head of cattle or a dozen sheep, a few chooks a decent vegie patch and as big a shed as you could possibly want. The cattle/sheep would pay for themselves and keep your freezer full. Good fresh eggs and vegies...yum.

Dan

SilentC,

I don't know whether you have considered moving interstate; but it sounds to me as though you want a place pretty similar to mine, but maybe with a somewhat larger house. You have seen my place, and I believe it is only worth about $450,000, so if you bought something similar up here you could do it comfortably, without having the hassle of building it yourself. However, maybe family ties would rule this out.

It might pay to wait a few months until thoughts of tsunamis have faded from peoples' consciousness before you try selling a house on the sea shore.

Rocker

Well YOU asked what we'd do.



As to redevelopment, that, is probably inevitable, the timing is the question. You need to ask yourself, and your family are they ready to move on and open a new chapter. That is the real question.
For the how question. Ask yourself how much risk you wish to carry. Redeveloping the property yourself has the highest potential gains, along with the highest risk.

Whatever you do don't buy "acres" with the thought of making money or any sheeps, cows, horses, goats or pigses, will be self sustaining, or cover any of their expenses. They will be a drain on resources, look at them as pets, probably expensive ones. There ain't no way SWMBO will let you place any of them in the freezer without you going to keep them company.
If I owned a 4 bedroom, 2 bath house with a 2 bed self-contained flat on a double-sized block with 180 deg ocean views and 400m from the beach. It has a small garage and a 'workshop' carved out underneath. It's conservatively valued at $580,000 although we might get 620 or more. There is no mortgage on it. It's been the family home for nearly 30 years, I'd be pretty apprehensive in letting it go.

I'd renovate, expand into the neighbours, underground, or upward. That view ensures a healthy capital gain, and a healthy way to get things into perspective when things get out of control.

Darren,

Can you afford to move and rebuild ?

The best scenario would be Sale price $ 600k less:- Purchase new land $230k, Legals etc $ 50k, Storage furniture /accomodation $ 20k , leaving $ 300k available for building your dream home, parents unit shed etc.

However it may well be that you don't realise the sale price and that you spend more on accommodation whilst building so that you may have only about $ 250k available.

Also whilst the kids may have room to run around you will have to drive them to everything for a long time ( no more shed time :( ).

Personally I think you might be better of renovating and rent say some space on a farm for a few storage sheds to store and dry timber.


Peter.

Actually, regardless of my previous post, I agree with Outback and Sturdee.

It seems like you are in a pretty good situation already and as Dan pointed out, do you really want to have 10 acres of fields to look after?

Besides, your current place will appreciate faster than a bush block in the next round of property price increases even if the market has gone off the boil at the moment.

C'mon admit it, you only want the bush place so you can have a forge. :D :D

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Originally Posted by craigb

C'mon admit it, you only want the bush place so you can have a forge. :D :D

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and what is wrong with that scenario :confused: :confused:

I only have one question Darren.

Are you happy there? If so why go through all the hassles.

Exactly what said,IF'N you're basically happy where you are then why put yourself,your immediate family and your parents thru changes unless they're also becoming unhappy with their lot there?

IF all it is,is a few basic changes & requirements to the existing property with a minimal outlay then surely for you it must be beneficial financially.

I have a similar situation approaching retirement do I move to a property we have in Queensland with a larger area for a woodworking environment,but with the cost involved in moving is it better to stay here in W.A and make the necessary changes and adapt which would most likely be financially better off?

SC, for what its worth and I dont know whether you have approached all your family but their views will help in a collected decision with all the parameters involved and the costs not only financially, but with possibly onerous mental upheaval from their comfort zone.
One real estate agent recently told me that views are paramount in retailing property and it seems to me that your situation is almost idyllic apart from the required $$$$ and in time it may be a judicious decision on your part to stay where you are and make the necessary adjustments to accommodate your lifestyle.

Sorry for rambling on ..just my 2C worth
Cheers :) and good luck

Quote:

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Originally Posted by HappyHammer

... Be careful when looking at blocks, try and restrict yourself to Real Estate windows and newspapers. If you eyeball the ideal site at the right price you may be tempted to jump in ...

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Good advice H, that's just what the investment property lady on the ABC radio said tonight.

What Dan & others say about not going too big is good too, we have 10 Acres in the hills & about 5 of them need to be mowed every 2nd day at present. We are going flat out to turn at least another 3 back into rainforest so we don't have to mow it.

Also, beware the trap of animals..... you will have problems ever going on another holiday again. My Mum & Dad live out in the bush behind Longreach. They have about 33,000 acres, somewhere between 2,000 & 4,000 sheep & a couple a hundred cattle & they can't go anywhere when it's a drought & they can't go anywhere when there's a flood & when the weather is good, they can't go anywhere 'cos the can't get anyone to look after the cat, 8 dogs, 3 geese, 9 ducks, 15 chooks & 3 acres of garden. :mad:

I'd be thinking hard about what John, , Outback, Simon & Sturdee have said.

The investment lady says, if you have equity in a good property & an income to service the debt, borrow againtst the one you already own.
The cruncher is, you have to be able to service the debt.
Whether you borrow to improve your capital gain on your existing property or borrow to buy an investment property is up to you.
If you can't service the debt & you are selling just to buy elsewhere, you are going backwards.

Fark... how do you sleep at night with all this stuff whirling in your head? :confused:

Friends down the road have five kids and a similar situation. They rounded up the kids and laid out the options. After the kids had thought about it for a few days they all said they would rather stay put. (and live through Squizzy knocking down walls, gutting the kitchen and adding more bedrooms:D ).

Kids can be very perceptive if they have a balanced approach. My kids get down to my brothers farm on occaision and I'd say that acres is for myself and the eldest daughter. SWMBO and the lad like it but prefer the 1/4 acre & 3 x 2 in the burbs.

Friends were pleasantly surprised when the kids wanted to stay in the current house having already resigned themselves to the nausea of moving/buying/selling etc.
It just depends what you really want and it aint really about the money.

Cheers

OK, thanks for the feedback everyone. I found my self swinging like a pendulum as I read each post. Some things I hadn't thought of, some I had.

We're all basically happy where we live now. In fact there are very few cons. The house is run down but it can be fixed up. It's comfortable inside, very tired looking outside. It needs a new kitchen and bathroom etc. etc.

I think most people would think we're mad for even thinking about moving. Although I think a lot of people might change their minds if they lived here during the christmas holiday period. The constant stream of traffic and people and the way they assume that because they're on holiday no one else matters. They don't seem to realise that people actually live here and most of us aren't here to serve them.

Good point about the tsunami, Rocker. We reckon we would have been OK if that wave hit here because we're actually quite high up behind the cliffs. Would have been carnage down on the flat though. We look down over a caravan park and it was full of people on Boxing Day.

Yes Craig, I want to build a forge :D I'd like room for a bigger shed and more storage. I'm tired of moving things from one pile to another in a never ending attempt to get some sort of order happening (yes I know, all of you with big sheds still find yourself doing that).

My wife likes the idea of more room for the kids. They can't even ride their bikes where we are now because the bloke slopes about 1 in 3. She likes the idea of being able to make a practice chipping/putting green and being able to smack a few balls into the back paddock.

My dad is 'off the land' and likes the idea of farting around on a few acres. Mum would be happy to stay but will go with the flow.

HH, I am a bit impulsive. If I sit on this for a few weeks, chances are it will evaporate. It's just that we have a lot of work planned this year on the house and I want to be absolutely sure we're going to stay there for at least the next 10 years before we spend any money. It's sort of a now or never thing.

Oh well, we're going to look at some land today to get an idea of what we could get. I'll keep all the comments in mind about upkeep, animals etc. Bush blocks are common here, so there wouldn't necessarily be any grass to mow. Just lots of trees. Woolybutts, Ironbarks, Turpentine etc. See where I'm going?

Thanks again.

Darren,

A couple of more things for you to consider.

1. I am sure those in NSW (and ACT) are aware of the Bob Carr land taxes where those on the coast and in Sydney - who might have bought a nothing block but with harbour views 40 years ago and have lived there ever since suddenly had to sell because they were millionaires (according to Bob anyway) as they could not afford the huge hike in land taxes. I think that this kind of tax is likely to affect your property evantually.

2. Is your block a development site in waiting? - what I mean by that is will you be eventually surrounded by high rise or other undesirable neighbours in 5, 10, 15 years and will the road in front of your house be a 4 lane superhighway? What are the development policies of your local council currently and into the future when new peopls move in and perhaps change the priorities of the council - in favour or violently against development? Also remember the current trend in NSW (thanks Bob) of amalgamating councils (forcibly) and sacking councils - (he should devote his energies to fixing the trains and electricity supply). Also think of the current city centres in Australia - at one time these had residential houses there - now all high rises - is this likely to happen to a differing extent where you are?

I envy your location but not your current dilemma.

Cheers

Good point on the land tax, numbat. The local council has been pro-development. We have so many sea changers and baby boomers coming here, they have no choice. Rates in my street are second highest in the shire. This year they were $2600 plus about $80 per quarter water usage charge. Land tax on top of that would be a killer.

We had a look at some vacant lots this morning. Prices range from $190-$200 thousand. All negotiable of course. If we could build a house and shed for, say $300,000, we should have money in the bank after the move.

All of the blocks were good. All around 2-2.5 acres. Some bush, some cleared. All have views over the valley and the town. No town water :( Underground power and phone :). Rates about $600 per year :D.

Decisions, decisions.... :confused:

Quote:

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Originally Posted by silentC

If we could build a house and shed for, say $300,000, we should have money in the bank after the move.

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Well assuming building costs of $1400/sq metre (obviously much cheaper if you're doing it yourself) you'll get a 180sq m house for $250,000.

Seem like a fair size house ?

I don't know. I'll have to do a floor plan in Chief Architect and see what it comes up with. They quote $1000/sq metre down here. If we couldn't build something decent for that money, there's something wrong. And a bloody great big shed!! Oh, and a putting green (yes dear).

My in-laws (to be neighbours) are building a new house in Chatswood Sydney. It will cost them almost $600K. Wow. If I did not agree to do most of the woodwork in their new house then it would probably cost them another $50K.

Don't make the shed too big, otherwise, when you decide to go and fetch something from the other end, by the time you get there, you have forgotten what you went after. Seriously, I think 9 m x 12m is a pretty good size for a shed.

Seems to me that you can't go too far wrong if you can buy land for $200K and build for $1000/m2. No town water is a bit of a worry, but you get plenty of pretty regular rain down there, so, if you have a large tank, I suppose you will be OK.

Is it impossible to buy what you want already built, so as to save yourself the hassles of building yourself, and paying architects etc.?

Rocker

SC,

Not sure about down your way but at the outlaws farm they have to have two large tanks and only use one as the other is for the rural fire brigade, should budget these if you get no town water.

HH.

I've only skipped through this thread (and 450 others :D ) but I can't resist giving someone I don't know free advice, specially when there's no chance of getting sued if it's bad!

1) Sit down, look at the ocean, then look at your yard. Given your well publicised propensity for mowing, you'll just love looking after an acreage!! It's the great Australian dream after all!!

Be aware though, that they just aren't making any more lots with water views, and the rate of capital appreciation of quality lots is far greater than for "normal" allotments, and there is no reason to suspect that this will not continue. You may find yourself in a situation where you won't be able to buy back in after the rush of blood to your head is over.

2) DON'T become a developer...at least not for now. You are at the end of a long upward cycle, where there are a lot of "experts" who have made a lot of money by being in the right place at the right time. You are undoubtedly in the right place, but the time is not right when there are no builders available for umpteen years, and you have no way of controlling costs.

Wait till the beginning of the next cycle....How will you know when that is?? If you can't work it out, you're not ready to be a developer...wait some more.

3) Why not become an investor?? Use the equity in your home to fund an investment property which meets your dream aspirations. Find a small acreage nearby with an existing house on it which can be let out... with a bit of luck it'll even have a shed which you'll tell the tenants is there for your purposes. Your old man can potter with maintenance, you can have your furnace and other messy stuff there (keep the workshop at home), and in 35 years or so your tenants will have paid off your shed (which will have certain tax benefits as well if your accounting is "right")

Cheers,

P ;)

Darren,

Some more free gratuitous advice - particularly about the lack of town water. This will be a big concern if you ever have a bush fire (the current SA one and of course the ones we had here a few years ago (I dont want to go through one of those again) come to mind).

Make sure that you have a couple of big water tanks and make sure that you have your own working diesel water pump (test regularly) to fight the fires (dont have an electric one - you probably have wooden power poles right - I can still remember exploding pole top transformers and decimated power lines).

Also you are a web developer right? Do you rely on ADSL connections to work? Make sure that wherever you go that you can get it.

Also be especially interested in access roads to your block - are they flood prone, wash away potential, are there bridges to get to your block. Not good if you desperately need medical help and you cant get out of your place.

Good luck with your deliberations.

Cheers
Steve

"There is no mortgage on it. It's been the family home for nearly 30 years. My parents live in the flat, which is part of the deal with us getting the main house rent free."

Answer..... it apparently doesn't belong to YOU..... wait till the poor old buggers cark it before you sell THEIR home...........

I'll keep it simple...

If you have a doubt, don't do it...

Christopha, where do I start? ..... :rolleyes:

We've looked around and anything already built is going to leave us without enough cash left over to do what else needs to be done. Most places on the market are 3 bedroom and don't have a separate flat, so we would need to extend whatever we bought. The new development approval process here means you have to bring the rest of your house up to current standards as well, so unless it's a new house, it's just going to cost too much. People selling new places expect to get their money back and some (unlike when selling just about anything else that's second hand). If we build, we can build what we want and have the best chance of saving money.

We looked at a 2 acre block yesterday that is walking distance from town, the school, the pub :D. The road in is a bit low in one place, so getting cut off is a possibility but there is an escape route up the back of the property on an old firetrail if worst came to worst.

Regarding water, my BIL makes rainwater tanks and the old bloke is a plumber, so we should be covered there. As long as it rains... We are in a drought at the moment but we got a few good inches a couple of weeks ago.

The power and phone lines are underground. I'm going to check out ADSL and 3 phase power. It's a new subdivision, so hopefully they've put in plenty of capacity and not split lines between lots.

If we held onto the beach place for another 10 years, it might skyrocket. As I've said though, money is not the motivating factor.

Still thinking....

OK - so what did you decide to do?

Cheers

It's on the market. Open day this Saturday and auction in March. If we don't get what we want for it, we're staying put. Signing a conditional contract on a 1.1ha bush block this week. If we exchange on the house, then the contract on the land is binding. If the sale of the house falls through after that, we either lose our deposit (which is a fraction of the deposit we'll get on the house) or we buy the block anyway and make it a more long term plan.

Do you reckon 12x6 is too small for a shed? :D