Top tips to help with subdivision
REZONING in many areas offers the opportunity to buy a block, subdivide, build and sell the new homes. It also allows many home owners to subdivide their block and build behind their current home. These types of development suit a smaller investor, who can work with family and friends if they wish, and can be profitable, but they also come with risk. Assetbuild specialises in triplex, house-behind-house and multi-unit developments and director Kevin Bishop offers the following advice to help you achieve your goals, profit from and enjoy your next property development. Do your research
Seek expert advice before purchasing a development site that does not already have approvals in place.
I recommend exploring all possibilities prior to making an offer for a site, or if that is not an option, be sure to include a due diligence clause in the contract.
This will enable you to secure the property, while maintaining a get-out-ofjail-free card in the event it fails the due diligence test. Consider the title you will create
There are often two or even three title options for every development: green title, survey strata title and built strata title.
Each has its own set of costs and implications, with the cheapest solution not always the best.
The critical path of your development will certainly be closely linked to the title strategy, so make sure you are educated enough about each possibility. Speak to a variety of people
There are various stakeholders involved in every property development and all have their own speciality and agenda, and they frequently seem to contradict each other.
For example, council advice is often considered by the layperson to be conclusive, but in fact that is very far from the truth.
I have seen situations where an investor has purchased a property based on council advice that it was a triplex and could only achieve duplex, and I have also seen the opposite.
Real estate agents may represent a property for sale as subdivisible STCA (Subject To Council Approval) but there may be forces other than council at play who may take a differing view and in some cases override the opinion of council.
Builders, and usually big-name builders, are generally the other preferred source of advice for the investor and this also is not, in my opinion, the ideal starting place. Often you deal with a salesperson, who has excellent sales skills, but generally a limited amount of subject matter expertise outside of the typical project favoured by their employer.
Seek advice from a third party that has you as its priority, rather than the interests of their employer. Choose a builder that will work closely with you
Bigger builders are also generally focused on taking on work that suits them, so their advice will always be skewed towards the type of product that they would like to build.
I recommend choosing a small to mid-size builder, as they will always offer a superior service from start to finish and no matter the scale of your project, you will be known by name, not your project number and you will be dealing with the builder direct.
Only work with a builder that is willing to provide you with contact details of the supervisor and construction manager; issues are resolved more quickly and the message does not get diluted. Avoid hidden costs and surprises
While there is a degree of protection to be found within the HIA contracts, items listed as provisional sum (PS) are where the risk lies.
Many larger builders apportion more than 20 per cent of the contract price as PS and that price can vary at the builder’s discretion and you have littleto-no say about it.
Avoid PS unless absolutely necessary. Get extra help
Some of the more successful first-time developers I have worked with over the years have engaged with project managers who are subject matter experts and not only provide unbiased advice but also make huge gains in time (and stress) management.
In property development, you will often find yourself juggling a lot of balls and you only have two hands.
Do not be afraid to seek a helping hand; it is inexpensive and often cost-neutral due to the savings that can be achieved and will likely prove to be one of the best investments you make.
The right advice can help make your property development a success.