2 or 3 Townhouses: The $1 Million Corner-Site Question

https://www.youtube.com/watch?v=ySCWkeGXBf0

What if I told you the corner development site you’re working on right now, the one you’re putting so much time, money, and energy into could actually be worth hundreds of thousands more… maybe even over a million?

And what if I also told you that unlocking that extra value doesn’t come from some complex trick. It comes down to just one simple decision: do you build two townhouses, or do you build three?

In this article, I’m going to walk you through the exact framework I use to answer that question.

And by the end, you’ll have a 7-point checklist you can run through on any corner site before you buy.  A checklist that can literally save or make you six or seven figures on your next project.

Corner Block Pros and Cons

So, let’s actually talk about the pros and cons of corner sites, because they can be a bit sneaky.

On the surface, the pros look amazing. You’ve got two street frontages, right? Which straight away gives you more flexibility when it comes to design. You don’t need to worry about a shared driveway, which buyers generally hate. And the street appeal is almost always stronger, every home feels more like its own standalone property.

So, at first glance, it’s easy to think: this is free money, I can just squeeze in an extra townhouse and go for three and cash in.

But here’s the thing, the cons are just as real. Every townhouse needs its own crossover; that’s the strip of concrete across the nature strip that actually connects your driveway to the road and that’s where corner sites can start to get a little tricky.

Because when you walk the block, you realise the frontage isn’t just a blank canvas so it’s not always possible. You have immovable things in the way such as big trees on development sites that can’t be removed. Power poles that cost a fortune to relocate, drainage pits, fire hydrants, NBN boxes. Even bus stops or speed humps right out the front.

Some of those you can move if you’re happy to spend the money. Others are you aren’t allowed. And if you can’t safely fit the three crossovers, your dream of squeezing that extra townhouse onto the site ends right there.

That’s why I always say the first test with a corner site isn’t sketching what you want to build, it’s just walking the frontages with a critical eye. Because if achieving the third crossover doesn’t work, nothing else matters.

Design Factors: Sunlight, Shape and Planning Rules

If you get past the crossover test, the next thing you need to be considering is the design, specifically the orientation of the site as it relates to sunlight, its shape, and the planning rules. All of which will affect what is possible.

Let’s first talk about sunlight.

In Australia, north light is what townhouse buyers are looking for in living areas. You can’t underestimate the benefit of waking up in the morning to beautiful sunlight shining into your main living areas. If you push to three townhouses, does that end up forcing one or more homes into darkness. With south-facing living zones?

If so, you might be able to get three townhouses legally, but you’ll cost yourself a lot when it comes to selling.

No one wants to live in the dark if they don’t have to, and buyers are getting much smarter.
They look for and pay a premium for north-facing living zones where they get the benefit of the sun.

Next, you need to look at the block dimensions (shape). As a rule, wide and shallow sites can typically handle three townhouses, while narrow and deeper blocks usually favour two larger homes with decent backyards.

At this point, when I’m doing property development due diligence and site analysis on a corner site, I like to do a quick sketch on a pad to see how it looks and fits.

I’ll draw the footprint of two townhouses roughly to scale, then do the same with three townhouses, and ask myself simple questions like: at this size can real furniture fit, can people move around the rooms, or would it be too tight?

Because remember, if your townhouse designs don’t work in real life, it will cost you big when it comes time to sell or rent the townhouses, whatever your end plan might be.

Now we need to talk about town planning rules, because they do matter and will affect what can or should be built.

In Victoria where I am based, recent ResCode changes put a cap on front setbacks at six metres, and they relaxed the side and rear setback requirements. This essentially means the upstairs footprint can potentially line up with the downstairs footprint, which ultimately gives you more usable area.

Sometimes that can be the difference between fitting two, three, or even four townhouses in some circumstances.

So it’s always important to check your exact residential zone and planning overlay requirements with a town planner.

And don’t forget the hidden cost almost all first-time developers miss, the Open Space Contribution.
This is money you need to pay to the council the second you move to three or more townhouses on any development site. In most cases councils will typically charge around five percent of your land value.
On a $1.8 million block, that’s about ninety grand. It may not be project-killing, but it can tilt you back to building two townhouses instead of three.

And if this feels like a lot to take in, which would be fair!
That’s exactly why we built our free property development network the Little Fish Network which has thousands of everyday property developers already inside.
You can ask questions, share your projects, and see how others are tackling the exact same challenges.
It’s free forever, takes two minutes to join.

The Numbers: 2 vs 3 Townhouses

Alright, suppose you can get the three crossovers, the orientation of the site suggests you’ll have nice sunlight hitting your living zones and you tick all the town planning requirement boxes, the next thing you need to do is run your numbers, what they might look like if you go with two versus three townhouses.

Here’s how a typical corner site might play out numbers wise.

Let’s say you pick up a block for about $1.6 million. If you build two larger homes, you’re probably in for around $1.7 million on the build. If you push it to three smaller homes, that jumps to about $2 million, and then the council clips you another eighty grand for the Open Space Contribution.

This is why understanding the cost to build a dual occupancy or multi-townhouse project matters before you commit to a site. The difference between two and three homes is not just one extra dwelling, it can change your build cost, council contributions, holding costs and overall risk profile.

Now think about the sales side. Two bigger homes in a good suburb might fetch around $2.1 million each, so that’s $4.2 million all up. If you go for three smaller ones at $1.6 million apiece, you’re closer to $4.8 million total sales. Also known in the property development game as GRV, gross realised value.

So, when you run the rough numbers, two homes leave you with about a $900k margin before other costs. Three gets you around $1.12 million. But remember, you’ve now got to sell three homes instead of two. Remember these are rough numbers, but you see where I am going.

And here’s the thing, even those numbers don’t tell the whole story. In some suburbs, buyers will pay a premium for bigger homes with larger spaces, so the two-home play actually wins. So you need to talk to local agents, get a feel for what the market actually wants, and look at the sale prices of townhouses similar to the ones you’re planning to build.

In other areas, it’s the more affordable stock, so cheaper townhouses that sell quickest, and that’s when three gets the edge because of the lower sale price.

That’s why you can never assume. You’ve got to run the numbers, look at the market, and work out which way makes the most sense in reality and not just on paper.

The 7-Point Corner Site Checklist

OK, now it is time to bring it all together with the seven-point corner site checklist I promised earlier that you can run through on any corner site before you buy.

• One is access. If you can’t get the three crossovers in, nothing else matters.
• Two is orientation. Are your living zones actually going to get that northern light, or will your buyers need to be happy living in the dark?
• Three is the shape of the block. Does it naturally lend itself to two larger homes on a narrow, deeper block, or can it comfortably take three smaller ones on a typically wide and shallow block?
• Four is design. You need to sketch it out and ask yourself: can furniture fit. Can people move around, or does it just feel too tight?
• Five is planning. Know your setbacks, height, and planning overlay restrictions, because they’ll dictate what’s actually possible.
• Six is hidden costs. Remember, the second you go to three or more townhouses on any block, not just a corner, councils will clip you for Open Space Contributions. And you might also be up for moving drainage pits or even power poles that are in the way of where you need the new crossovers.
• Seven is the market. Talk to local agents, get a feel for what buyers in that suburb actually want, and look at the sale prices of townhouses similar to the ones you’re planning to build. That way you’re not just running numbers on paper, you’re grounding them in reality.

Recap

So, remember, corner sites can be an incredible investment for townhouse developers. But it doesn’t always automatically mean building three is the right play.

You’ve got to check access, sunlight, planning rules, and consider the market. Sometimes three is the winner. Other times, two is the smarter, safer play.

And if you’d like more support, that’s exactly why we built the Little Fish Network. It’s our free property development community with thousands of developers already inside. It’s free forever, takes two minutes to join.

Or, if you’d rather have my team and I handle your project from start to finish. You can book a call with me directly, and we’ll talk about your site, your goals, and what’s possible.

Lastly, see how much land is required to build 2, 3, or 4 townhouses.

I’m Peter Kelly. Appreciate you sticking around. Until the next one, see you at the top!

Filled under: All Design Dual Occupancy