For those who haven’t subdivided a property before, it can be hard to know where to start with the entire process.
Subdividing a property can be highly lucrative, however for many it’s simply too overwhelming to know where to start.
Here are three questions every investor needs to answer to be better positioned to help turn their subdivision dreams into reality.
What’s the best use of the block?
Speak to a town planner or project manager to understand how to maximise the potential of your block when subdividing. While the zoning of your block will determine the number and kind of dwellings that can be built, there may be clauses in the local planning scheme that allow for greater density, such as design bonuses or lot variations, for example.
What are the associated costs?
Make sure you have a thorough understanding of all the costs associated with a subdivision. The costs vary from state to state but can typically include the following:
- Land surveyor fees for subdivision plans, cadastral surveys, subdivision clearances and preparation/lodgement of subdivision application.
- Application fees to the local planning authority to assess the subdivision.
- Connection fee for water head works.
- Connection fee for power supply works.
- Conveyancer fees for application of new titles.
There may also be other fees required including demolition fees (in cases where an existing dwelling needs to be removed), contractor services fees (for required civil works) and contributions to local council amenity initiatives.
Do you plan to hold or sell?
Once you’ve subdivided your block, do you plan to sell the vacant land? Or, in the event that you build on it, do you intend to sell the dwellings or hold on to them for future capital growth?
Depending on the size of the subdivision, you may want to sell some of the newly built dwellings and keep some. It’s important to have a clear end goal in mind as this will have a big influence on many of your initial decisions and final profit. Therefore, detailed calculations need to be completed to determine estimated profits, impacts on your cash flow from holding property and relevant tax implications from selling property.
For more advice for aspiring investors take a look at the ongoing expenses of property investment, common property investment traps and how to avoid them and 7 questions to ask yourself before buying an investment property.