The Half a Million-Dollar Question
Just over a year ago, we made the big move from Camden (outer southwest Sydney) to Bundanoon—an extra hour’s drive in the same direction—for a simpler, more peaceful life. A classic tree change. We sold our first home for $940,000, a solid gain from the $465,000 we paid 10 years earlier. With that, we bought a plot of land in Bundanoon for $500,000. After paying off the remaining mortgage and covering all the fees, we were left with a healthy $400,000 in the bank and a $370,000 mortgage on the land. Things were looking good. We even put a deposit down on a modular home, which was expected to cost around $400,000. It seemed like everything was falling into place.
But then we hit a snag. Have you ever tried submitting a development application (DA) to a council, especially the one governing Bundanoon? They say six weeks for approval, maybe three months at most. Try 12 months. We were prepared to rent for a year while everything got sorted, and we found a beautiful spot that we love. But as the months dragged on, it became clear that things were going south.
First, there was the BASIX certificate issue. "You need one," they said. "No, you don’t," we replied, pointing to a NSW planning document that clearly states modular homes don’t require a BASIX certificate. A couple of months later, the builder informed us of a discrepancy they were working to resolve. I thought we were finally getting close. Then, during a Zoom call at work, someone asked, "How’s your house going?" I hadn’t checked the DA tracker in a while, so I logged in to see what was happening. That’s when I saw it: a letter titled "Request to Withdraw Application."
My heart sank. After a panicked phone call to the project manager, he confirmed that our DA application was on the verge of being rejected. The reason? Some technical term related to land zoning that meant modular homes couldn't be built on our type of land—"at the council's discretion," of course. The kicker? Three modular homes had already been built in the same council area.
With challenges come opportunities, and this one is a biggie for us. The question now is: What do we do with our half-a-million-dollar block of land? Here are the options we've been considering:
Sell the land. Cut our losses, hopefully break even, and buy a pre-existing home. The big question mark here is the $30,000 deposit we’ve already paid to the builder. I’m assuming it’s gone unless we can redirect it toward a smaller build, like a studio in the backyard of a new property.
Wait it out. Our builder and project manager have some "connections" in the NSW government. They’re optimistic about a meeting with the NSW Premier, who they believe will be so outraged by our situation that he’ll sign off on the project, and everything will be fine. It’s a long shot, but it’s the current plan.
Build a proper home. Unlike a modular home, which is built in a factory and assembled on-site, building a traditional home means starting the process all over again. But after contacting a builder, this option has become surprisingly attractive and more affordable than I initially thought.
Modular home build time: Approximately 4 months
Proper home build time: Approximately 6 months
Rentvesting. We could continue renting, keep the land, and use the $400,000 to accelerate our investments. Or, we could sell the land, pay off the mortgage, and use the remaining $540,000 to supercharge our share investments. This isn’t your typical rent-and-buy-an-investment-property scenario, but it’s an alternative worth considering.
Right now, we’re leaning toward option 2—waiting it out. We’re heading overseas for a month at the end of September, and I’m hopeful that by the time we return, there will be some positive movement. The builder wants the sale to go through, after all. However, options 1 and 3 are still on the table, with option 3 looking more appealing as we dig deeper into the details. While option 4 would make life incredibly comfortable in the short term, owning our home is a key part of our FI plan.
Another question we’ve been pondering: Can we make that $400,000 more productive while we wait? For the past 12 months, it’s been parked in two high-interest accounts (earning between 4.75-5.5%). A colleague recently suggested, "Why don’t you pay off your mortgage?" I hadn’t thought of that. We could pay off the $360,000 mortgage and still have $40,000 left in the bank. Originally, we planned to increase our mortgage to cover part of the modular home and then use some of the cash to kickstart a debt recycling process. But depending on which of the four options we choose, our approach could change.
While this situation is frustrating, it's also a good problem to have. Like most things in life…time will tell.
What would you do?
I look forward to updating you on the outcome soon.