An Albert Park garage on a tiny 46 square metres of land sold for $645,500 in a fierce auction on Saturday.

A boutique developer from Templestowe Lower shelled out $245,500 more than the seller’s reserve price, a comparatively eye-watering sum for the unliveable property.

Lola, who asked for her last name not to be published, hopes to turn the garage at 32 Little Graham Street into a new home, but said the purchase was a risk for her and her husband.

“At the moment I’m a bit terrified,” Lola said. “Because everything is a risk. I can’t go into this thinking, ‘Oh, this is going to be amazing.'”

Husband Brenton added: “It’s a calculated risk, it’s a very good area.”

The garage made headlines recently when it was listed for sale with a price guide of just $365,000 to $400,000, with listing agents Greg Hocking Holdsworth reporting huge interest in the property, including from overseas.

Albert Park has a median house price of $1.98 million, on Domain data.

The interest translated into a crowd of more than 100 packed into Little Graham Street and more than 50 bids.

The auction began at $400,000, the top of the quoted price range, and Lola had to fight off about six other hopefuls to win the block.

After a long auction, she secured it for $245,500 more than the reserve price.

“It was too good an opportunity to pass on,” Lola said. “I’m a bit stunned.

“It’s the worst house on the best street.”

Brenton joked: “But it’s not even a house, it’s a garage!”

32 Little Graham Street, Albert Park VIC 3206 View listing

The garage, which last traded in the 1980s for $8000, was used to store the previous owner’s tools when he worked as a plumber.

Lola plans to turn it into a multi-storey unit, depending on council approval. She may rent out, sell or live in the completed home.

Auctioneer Simon Gowling said the huge sale price was surprising.

“I can’t see anything dating back into the 1970s that has been a single-car garage for sale in Albert Park,” he said. “So you never really know what it’s going to sell for.

“It’s just incredibly rare, so when something like this pops up, it’s always going to generate a lot of interest.”