Is it worth sub-di­vid­ing your land?

Wangaratta Chronicle - North East Property Guide - - FEATURE LISTING - Writ­ten by | view.com.au in Buy­ing

Sub­di­vi­sion has been the Holy Grail of in­ner-city de­vel­op­ment over the past decade or two; seem­ingly ev­ery­where you look, there are older homes on quar­ter-acre blocks be­ing de­mol­ished to make way for col­lec­tions of com­pact town­houses. As the old say­ing goes, they’re not mak­ing any more land, and in our big cities this scarcity is help­ing drive high prof­its for savvy de­vel­op­ers.

If your home is on a large block, chances are you’ve thought about sub-di­vid­ing it to make some ex­tra cash – but how vi­able is this strat­egy in to­day’s mar­ket?

The ba­sics of sub­di­vid­ing

One crit­i­cal fac­tor to con­sider is the block it­self.

How is it af­fected by coun­cil zon­ing? Is the back­yard so steep that de­vel­op­ing it wouldn’t be cost-ef­fec­tive, and what about drainage?

You’ll need around 700m2 of us­able land (a min­i­mum of 650m2), along with space for a drive­way at least 2.5m wide, to make sub-di­vi­sion fea­si­ble.

It’s best to let the ex­perts weigh in on th­ese types of ques­tions, so con­tact­ing a town plan­ner or en­gi­neer is your first port of call.

Once you’ve es­tab­lished that your prop­erty is suit­able for sub-di­vi­sion, it’s time to nail down your strat­egy.

Are you plan­ning on keep­ing the orig­i­nal dwelling as it is or knock it down al­to­gether?

And what will you do with the prop­erty (or prop­er­ties) when they’re com­pleted… sell one and live in the other?

Rent them both out?

Th­ese are all im­por­tant things to fig­ure out long be­fore you start dig­ging foun­da­tions.

Ex­pe­ri­enced de­vel­op­ers have this down pat and buy prop­er­ties with all th­ese fac­tors in mind, but if you’re a mum-and-dad novice it’s best to seek pro­fes­sional guid­ance here.

Don’t for­get to speak to your ac­coun­tant about the tax im­pli­ca­tions as well – th­ese could erode your po­ten­tial prof­its if you don’t get your ducks in a row.

Are sub-di­vided prop­er­ties in de­mand in your sub­urb?

A cru­cial thing to con­sider is de­mand for sub-di­vided prop­er­ties.

If you live in the catch­ment zone for a sought-af­ter school, knock­ing up a three-bed­room home big enough for a fam­ily in your back­yard could be a win­ner, while in sub­urbs close to the CBD or near uni­ver­si­ties, a group of smaller town­houses suit­able for sin­gles and stu­dents might be more lu­cra­tive. As well as the project’s suit­abil­ity in your neigh­bour­hood, other things you need to con­sider are:

Red tape – the ap­proval process can be time con­sum­ing and frus­trat­ing, and the money you’ll spend on a top-notch drafts­man could save you a lot of backand-forth with the coun­cil if you get the plans and pro­posal right first time. If you have friends or fam­ily who’ve dealt with your lo­cal coun­cil pre­vi­ously, hit them up for their tips, or even bet­ter, see if they have a con­tact on the in­side who can help you through it all.

Bud­get – Of course, you’ll need to set a bud­get, and be care­ful not to over­cap­i­talise on the project.

Have a look at sim­i­lar sub-di­vi­sions in your area – what are the fin­ished prod­ucts sell­ing for, and how are the orig­i­nal prop­er­ties hold­ing their value now they don’t have a big back­yard as a sell­ing point?

Profit – What sort of profit or weekly rental in­come can you ex­pect once your build is com­plete, and how does it com­pare to what you’re spend­ing on the sub­di­vi­sion it­self?

Be care­ful not to over-es­ti­mate the po­ten­tial sale or rental price, as this could leave your­self out of pocket if the mar­ket dips. In­stead, it’s best to have a mod­est tar­get in mind, while also bud­get­ing for ex­tra, un­ex­pected costs. If you’re strate­gic and smart, sub­di­vid­ing your land can be a great way to build your wealth or cre­ate an ex­tra in­come stream. Just be sure to do plenty of re­search and keep your ex­pec­ta­tions re­al­is­tic, to avoid dis­ap­point­ment.

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