Gotta say , I lean to the idea of selling the potential to someone else.
Just finishing off a development in the Eastern states. Bare block subdivided , new townhouses built. Had the block for about 10 years.
What I've learnt so far is this .
The increase in value is definitely in the land , very little profit in the building. Lots of hidden costs as well . If you were a builder yourself , you could definitely save some money but would you make more than if you were building someone else's place ? Got to remember that as a builder your risk is much higher doing your own stuff.
If you were to develop and hold , then it's probably worth doing . You get the leverage of your development over time and some pretty good tax deductions ( depreciation ) .
If it's to develop and sell , considering selling costs and cgt , I'm not sure it's so profitable. You'll probably make a bit of money but was it really worth the effort and risk ?
My own circumstance . At the moment , if I sold I don't think I would make any more money now than if I had sold it undeveloped . That said , in this market , developers are few and far between so the bare block may take a while to sell . Because my plan is to hold ( probably for 10 years ) , then I'm going to get the benefit of the leverage over time. That plus the tax deductions which in my case are pretty good . Also , my gearing is pretty much neutral so my holding costs are minimal.
If I look 10 years forward as an investment , it should have been a safe , low cost , no fuss investment . I don't necessarily think it will provide above average returns but the safety of it makes up for that.
