Recently found a house for sale for $300k on a 1500m^2 block when 750 blocks are going for $140k and with houses $270k! It is ideally suited because it has a road front and back, and the neighbours blocks are two each side and look like they were similair and now divided.
What would be the costs with dividing this and how do you go about checking if it would get approved? The other block would be my PPOR so I can avoid any capital gains, but from what I understand, the UCV would be cut in half, and I would only be selling at about UCV so I wouldn’t really have any gain, the gain would be in my PPOR which ends up being essentially brought for $300 – $140 = $160
I then sell it after a year or so (cause im still eliagle for FHOG) for $300 !?!?Hi Dacium,
The following is an extract off our website about Subdividing:
What is Subdividing?
Subdividing is when a piece of land is split into two or more pieces (ie separate lots). The process is controlled by the local Council. Planning codes and procedures vary significantly between Councils and also between States and Territories, as do the relevant fees and charges.Factors to examine when considering a Subdivision
• Local town planning regulationsLand zoning restrictions
Minimum size of lots
Access to water and sewerage services
Setback requirements
Minimum building envelopes
Parks and open space
Easements
Vehicle access including Council refuse collection
Storm water management
Increased noise from new development
Environmental and heritage issuesHidden Costs
A subdivision can take several months (and sometimes even years) to complete so you must factor in your holding costs such as:
• Interest
• Rates
• Land maintenance – (eg slashing and weed control)Many astute Developers make the purchase contract for the land subject to the acceptance of a Development application approval with Council. This is usually done with an option agreement (see your Solicitor for more information)
Dividing the Land
Before you rush out and build a new dividing fence in your backyard, you should first consult your local Council for specific guidelines and costings, as it is imperative that the property is divided correctly. Any errors at this stage will cause major problems further down the track.The Process
Most Councils require a Development/Planning Application to be lodged, together with details and drawings of your proposal. A Town Planner or Surveyor can assist you with this process, and they may also be able to give advice regarding conditions that the Council is likely to require.Before lodgement of the Application, you can ask the Council for a “Pre lodgement†meeting to discuss your subdivision and determine what issues will need to be addressed in the Application.
When the Council receives your application, they may require you to erect a notice board for public viewing. The purpose of the board is to alert the public of the proposal by providing details of the subdivision. The Council may also write to the owners of the residents of the neighbouring properties advising of your intentions. We suggest that you contact the Council to find out what procedures your local Council uses.
Additional information the Council may require
Water and Sewerage
• Are existing services available?
• Can the existing infrastructure cope with increased use or need upgrading?
• Is permission required from neighbours to access property?Storm Water
• How will storm water run off be managed?
• Is a drainage pit required?
• Are tanks required to regulate the flow of storm water?Noise
• Will existing main road traffic noise affect the subdivision?
• If so, how will this be reduced? (Fences and/or earthworks)Soil Conditions
• Do the soil conditions (eg.sand, clay) impact on road and footpath design?Other issues
Footpath
Lighting
SignageIssues for the Developer to consider
For the Developer there are also other issues to consider such as:“Wasted†land due to unusual configurations
Steep slopes
Flood-prone land
Other planning overlays (ie restrictions)
Other factors that may reduce the number of lots and so profitability.Approval of the Development Application
The approval process for your Application may take several months depending on the complexity and size of the subdivision.You will then be issued with a conditional approval covering topics such as:
Developer to supply a plan of survey and mark land with survey pegs
Road reserve
Easements over stormwater, water and sewage mains
Requirement that storm water pipes be designed to cope with a “1 in 100 year†event.
Dust control
Hours of permitted work (usually Mon – Sat 6:30am to 6:30pm)
Headwork contributions to be paid by Developer
Open space (parks)
Social infrastructure
Road infrastructure
Water infrastructure
Sewerage infrastructure
Street scape contribution
Disposal of cleared vegetation
Entry walls or features
Connection fees to live sewer mains
Road (width, pavement depth, footpaths, kerb and channel, ramp profiles)
Street lighting
Fire Extinguisher (Battle axe blocks)
Underground electricity and phone
Erosion and silt management
Maintenance period of roads
Retaining walls
Fire ant inspections
Portable long service leave for Building and Construction Industry
If you are not satisfied with the Council’s decision, you may apply for a review.Operational Works
Before work can begin, you will need to engage the services of a Civil Engineer to design and draw the sewer, water, road, footpaths and any other Council requirements.This is a separate application usually referred to as “Operational Works†and attracts additional fees and charges.
Final Stage
All civil work will require Council and Engineering certification. When the subdivision has been completed to the satisfaction of the Council, you can then apply to register each separate title deed.Conclusion
Land subdivision is a $mart way to fast track profits into your investment portfolio. However, as with all investment decisions, thorough research is necessary in order to balance the level of risk associated and ensure that the process runs as smoothly and quickly as possible, and that the best, most profitable outcome is achieved.Hope this helps a bit,
AmandaBS
http://www.propertydivas.com.au
FREE online Property Resources“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
Hi
I’m going through the intial phases of our first sub-division unit development.
After consulting with the local council with regards to identifying any reasons or factors which may effect the development, I then contacted a local survey Co, then a local drafting and designer, then a local building Co, who was recommended by the surveyor and designer.
At present the surveyor and the designer are liaising, I am consulting with the designer and the builder is waiting to give a final quote.
The designer is matching our budget, and the builder is making recommendations – whats working and selling in the current local market.
This process has taken 6-weeks so far, I’m sure I’ll get faster at it next time.
Good luck with it.
Terry
[hair2]Would love to see more contributions here. I’m a newbie looking at purshasing my first property on my own after divorce settlement.
As the prices in WA have skyrocketed over the past couple of years, the only way I can see myself getting a few IP’s under my belt, is to buy, chop up, retain part, sell most and keep on doing the same for a while.
It is a mind boggle all the different things you need to take into account when purchasing a property for the sole purpose of subdividing. My advise is to talk to a local surveyor/planner for an hour. They aren’t necessarily cheap bu they will tell you everything that needs to be taken into account and budgeted for.
A big “cost” to consider is the contribution that the local council will require you to make for loss of open space. In my area if you subdivide the lot into three or more you have to contribute 10% of the land value to the council for public open space. Definitely made my sums look a little different when looking at potential purchases.
Good luck ,
Cat
If you're waiting for a final quote from the builder after you've met with your designer and the council, how do you know the final quote won't blow your budget? Do you purchase first, not knowing what the final quotes will be? Can you purchase subject to council approval if you don't know how long it will take (usually 3 mths)?
Hi Dacium, good job locating an opportunity.
The concerns:
1) End value: if you build 2 new houses on 750m2 blocks, each house will have to be sold for $400K+ to turn in some profit.
2) If you can build 3 on 500m2 blocks, each house will have to sell for $350K or thereabouts.Your holding costs depend on the time it takes to complete.
These numbers apply to where I'm at. They may differ in your target suburb.
A good idea is to work backwards from the yield. That's what I do. My worst case scenario would be if my properties cannot sell then how much cash flow do I get from the rental? If I churn out numbers that suggest neutral gearing, then I'm OK.
The banks will fund a project that shows good profit on end value so once the numbers are OK, funding is not the biggest problem. The biggest problem is managing our own cashflow.
Hope this helps. Good luck,
Kum Yin
I then sell it after a year or so (cause im still eliagle for FHOG) for $300 !?!?
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