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Buying The Right Block

How can you assess the pro’s and con’s of buying a block of land in Perth?

Here’s a few tips to serve as a guide to help you get the right block of land that will be most suitable for your family and lifestyle.

Standard rectangular blocks in new land subdivisions;

  • Consider your budget – be aware of the additional costs associated with building and purchasing a block of land. Stamp Duty, Site Costs etc… are all factors you should consider.
  • Inclusions – Most land developments including side and rear fencing and some landscaping allowance. Be sure you know what is included.
  • Settlement and Land Titles – Often new subdivisions don’t have land titles available. Find out when you can receive a title and when your settlement date is. Paying a large deposit to hold a block that is due to settle in 12 months is not ideal.
  • Check the orientation of the block – where you can you want your main living areas facing north.
  • Location location location – while most people will consider these factors it’s important to be mindful of current and future planned infrastructure. If you’ve got young kids you may not want to drive 20 minutes to the closest school. Also, planned infrastructure isn’t guaranteed. Often schools that are planned are not built for 10+ years. Have a contingency plan in place if you need to.
  • Development covenants or guidelines – these are becoming more imposing in some estates and should be considered well before you place an offer on a block. There may be requirements on colours, building styles, materials, balconies, privacy screening, noise control requirements etc… which may all impact your decision on a block.
  • Settlement agent – while not something most consider important prior to putting in an offer, it’s one factor you want to get right. A good settlement agent will check to see if there are any pending plans scheduled or any restrictions on the titles and inform you.
  • Conditions on contract of sale – Most land estate agents will expect you to put in a finance clause on your offer, however you should also include a due diligence clause of 7-14 days to allow time to find out more regarding the above issues. This will ensure you have a way out of the contract if you find conditions that will be too restrictive to your building expectations.

Established areas to knock down and rebuild;

  • Demolition costs can vary so it may be worth making some calls to a few contractors to get an idea of your demolition costs. Asbestos increases the costs so this should also be a factor and often can help in negotiating a lower sales price for the block.
  • Orientation is still a big concern and shouldn’t be overlooked, however most knock downs are limited in availability, and often you may have to take the home that meets most of your other criteria before this becomes a final deciding factor.
  • Rent-ability – If the home can be tenanted during the approvals process it can help take a bit of the sting out of holding costs. Factor this in to your numbers.
  • Demolition requires council approval of which the approval is generally 6 weeks long and requires 2 weeks of rat baiting after the tenants have moved out.

Blocks to subdivide and develop;

  • Get a feasibility done! I’ve said this before many times but if you’re buying a block to develop the land you really should spend some money on a feasibility. That could save you thousands in losses. So many ‘mum and dad’ investors think it’s a great idea to build investment properties however they often pay too much up front and are unaware of the associated costs to develop.
  • Check your zoning. While exceptions can be made, it’s safer to assume they won’t. Base your purchase on the current approved zoning especially if you’re a novice.
  • Build according to the location – this is more building related than land however if you’re purchasing a block in the western suburbs and thinking of building standard first home buyer 3 x 2 homes you should think again. Your overall development budget should allow for the appropriate building types expected in the area.