Should I Stay or Should I go

[silentC]

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?

[craigb]

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....

[silentC]

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...

[craigb]

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

[javali]

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

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.

[silentC]

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

[silentC]

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.

[inaminit]

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.

[numbat]

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

[simon c]

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

[silentC]

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.

[silentC]

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??

[Wongo]

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.

[simon c]

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

[HappyHammer]

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.