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Demolition vs Buying Land
Topic Started: 15 Jun 2017, 11:01 AM (1,373 Views)
Tyson
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Hi Guys,

Does anyone have any experience in regards to buying land vs buying an old POS home and knocking it down?

Are you more likely to find a better bargain by finding a house on land that you can knock down vs buying a vacant block of land?

I figure the advantages are I can have a tenant in there paying little money and not care at all if they are damaging the house, while I draw up plans and decide on what to do with the block of land. Then when I know what I want, I just knock it down and get a new house built.

I only did like 5 minutes of research just to show an example. Let's say I bought this house and knocked it down:

http://www.realestate.com.au/property-house-qld-mitchelton-122543266

Then built this house on it:

http://www.realestate.com.au/property-house-qld-mitchelton-125489134

What do you think that'd cost me? I wouldn't build that exact house on it, just curious as to prices. Golly might be able to weigh in a bit here since he's built a lot of homes.

Just seems crazy then I can buy a house for $460k and I've read demo costs like $20k (need clarification there) when I see blocks of land in the same area that are smaller selling for the same amount:

http://www.realestate.com.au/property-residential+land-qld-mitchelton-201725126
http://www.realestate.com.au/property-residential+land-qld-mitchelton-201796850

The land size of the $460k house is 597m^2 while the others I showed are 400m^2 & 450m^2. Even with the $20k demo costs, I'm still getting better value per square meter. Additionally the cheaper 450m^2 size block surely isn't a desirable shape to most people. You're going to have 2 houses jammed right up next to each other in that situation.
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Ex BP Golly
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Tyson
15 Jun 2017, 11:01 AM
Hi Guys,

Does anyone have any experience in regards to buying land vs buying an old POS home and knocking it down?

Are you more likely to find a better bargain by finding a house on land that you can knock down vs buying a vacant block of land?

I figure the advantages are I can have a tenant in there paying little money and not care at all if they are damaging the house, while I draw up plans and decide on what to do with the block of land. Then when I know what I want, I just knock it down and get a new house built.

I only did like 5 minutes of research just to show an example. Let's say I bought this house and knocked it down:

http://www.realestate.com.au/property-house-qld-mitchelton-122543266

Then built this house on it:

http://www.realestate.com.au/property-house-qld-mitchelton-125489134

What do you think that'd cost me? I wouldn't build that exact house on it, just curious as to prices. Golly might be able to weigh in a bit here since he's built a lot of homes.

Just seems crazy then I can buy a house for $460k and I've read demo costs like $20k (need clarification there) when I see blocks of land in the same area that are smaller selling for the same amount:

http://www.realestate.com.au/property-residential+land-qld-mitchelton-201725126
http://www.realestate.com.au/property-residential+land-qld-mitchelton-201796850

The land size of the $460k house is 597m^2 while the others I showed are 400m^2 & 450m^2. Even with the $20k demo costs, I'm still getting better value per square meter. Additionally the cheaper 450m^2 size block surely isn't a desirable shape to most people. You're going to have 2 houses jammed right up next to each other in that situation.
Haven't build a new home for close to a decade (apart from ppor on vacant land which has its own landfill!)

A big change since I last did it is dumping costs.
I think you are looking at $600 a ton minimum for demolition, transport and disposal.

There is a lot of material to get rid of, and Shiite like asbestos can add considerably!

I think you will find what you propose is still very viable though.

I'd be interested to know if ponzi economics has screwed it all up though.

Maybe others here can show that the economics of sitting in a shitbox is better?

Edited by Ex BP Golly, 15 Jun 2017, 11:18 AM.
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Tyson
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Ex BP Golly
15 Jun 2017, 11:17 AM
Haven't build a new home for close to a decade (apart from ppor on vacant land which has its own landfill!)

A big change since I last did it is dumping costs.
I think you are looking at $600 a ton minimum for demolition, transport and disposal.

There is a lot of material to get rid of, and Shiite like asbestos can add considerably!

I think you will find what you propose is still very viable though.

I'd be interested to know if ponzi economics has screwed it all up though.

Maybe others here can show that the economics of sitting in a shitbox is better?
Thanks Golly, interesting to know the ~$600/ton for demo.

Obviously I'd try to pick a bit more of a strategic house to knock down, i.e. single story, slightly smaller but on the same sized land or bigger and probably ideally at a cheaper price point in comparison to similar vacant land prices. I'm sure if I spent several hours looking then I could come up with better results and if I were keeping an eye on the market for months/years I'd hopefully snag some bargains (if this option were viable).

It just got me thinking because I was just looking at new houses and thinking they are on next to no land these days.

So I looked up land prices, and was surprised to see the land prices were so damn expensive - especially when I could buy a house on a bigger block of land for the exact same price.

I know you've always said you generally get better bang for your buck with building your own house and I've heard that before too.

I'm definitely curious if that option I posed would be viable.

As an investment property, would any of the demo, rebuild etc be tax deductible similar to renovations on a house? If not, at least I could claim the depreciation of a brand new house then.

If someone has some figures to show sitting on a shitbox is better then while that reality would suck, at least I find out either way haha.
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Ex BP Golly
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I think it is still highly viable, and all such costs would be deductible as an investment property.

I'd recommend it as a strategy.

Most of the houses I look at these days are only fit for bulldozing!

$600/ton is an estimate, someone here might be better informed than me.
Edited by Ex BP Golly, 15 Jun 2017, 12:40 PM.
WHAT WOULD EDDIE DO? MAAAATE!
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Tyson
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Ex BP Golly
15 Jun 2017, 12:29 PM
I think it is still highly viable, and all such costs would be deductible as an investment property.

I'd recommend it as a strategy.

Most of the houses I look at these days are only fit for bulldozing!

$600 is an estimate, someone here might be better informed than me.
Yeah I'm definitely going to do my research into it.

If all costs are deductible then I wish I earned more money since I don't earn enough to take full advantage of a $300k+ deduction (assuming the rebuild is deductible).

I think any loss rolls over until the next year but it means I'm wasting some of that tax deductions on the lower tax brackets.

Haha yeah I've been trying to find a good house to fully renovate to hopefully create a positively geared property or gain extra equity but half the time I can't help but think 'man it'd be easier to just start over again'.

However I would've thought if it were that easy then that's what most builders would be doing.
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stinkbug
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I've both built and renovated, and I'd suggest that you may get a better result doing a careful extension/renovation than simply knocking down and rebuilding. That said, not all properties can be viably extended/renovated, so you'd need to do full estimates and build a cost model for each scenario.

If I were going to build again for a PPOR, I think I'd probably pick a crap property on a good block and do the knockdown and rebuild, so I could get exactly what I wanted.
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Matthew
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I think you would find buying a POS and demolishing is significantly more cost effective than buying the developed land. The developed land has seen the developer wear the burden of all costs and looking to profit from people without the time, inclination or desire to go through the process.

Spot on you can collect 6 months rent while you decide what to do then knock it over when all your ducks are in a row.
My only hope for my three boys is that they turn out nothing at all like Chris.
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Trollie
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For a PPOR another advantage of buying and renting it out for 6 months is you get a chance to scope out the neighbourhood.

My advice is buy it if it makes sense as an investment first. You don't want to buy a dud rental and find out there's a problem knocking it down to build and then your stuck with a dud rental that can't be what you hoped.
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Tyson
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stinkbug
15 Jun 2017, 01:00 PM
I've both built and renovated, and I'd suggest that you may get a better result doing a careful extension/renovation than simply knocking down and rebuilding. That said, not all properties can be viably extended/renovated, so you'd need to do full estimates and build a cost model for each scenario.

If I were going to build again for a PPOR, I think I'd probably pick a crap property on a good block and do the knockdown and rebuild, so I could get exactly what I wanted.
Thanks Stinkbug, I know what you mean by assessing each scenario.

I'd be doing this as an investment property and not as a PPOR, so it's basically figuring out am I better to buy and rent out a POS, or buy, knock down, rebuild and rent - with ideally the house valuation higher than the costs associated to rebuild.
Matthew
15 Jun 2017, 01:09 PM
I think you would find buying a POS and demolishing is significantly more cost effective than buying the developed land. The developed land has seen the developer wear the burden of all costs and looking to profit from people without the time, inclination or desire to go through the process.

Spot on you can collect 6 months rent while you decide what to do then knock it over when all your ducks are in a row.
How do these developers get the developed land? Are they basically doing a similar thing? Buying a bunch of old houses, knocking them down and dividing the land up for profit?

I'm talking in cities obviously, I know rural/regional areas are completely different.

If so, then yeah I can definitely see how I could make a profit if I am cutting out the middle man.
Trollie
15 Jun 2017, 01:57 PM
For a PPOR another advantage of buying and renting it out for 6 months is you get a chance to scope out the neighbourhood.

My advice is buy it if it makes sense as an investment first. You don't want to buy a dud rental and find out there's a problem knocking it down to build and then your stuck with a dud rental that can't be what you hoped.
I'm only buying it as an investment option, not as a PPOR.

So it's working out whether it's a viable investment to knock down and rebuild for purely investment purposes versus just buying an established house and renting that out.
Edited by Tyson, 15 Jun 2017, 02:31 PM.
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Matthew
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Tyson
15 Jun 2017, 02:26 PM
How do these developers get the developed land? Are they basically doing a similar thing? Buying a bunch of old houses, knocking them down and dividing the land up for profit?
Exactly.
My only hope for my three boys is that they turn out nothing at all like Chris.
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