All Topics / Help Needed! / Backyard subdivision

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of BaysiderBaysider
    Participant
    @baysider
    Join Date: 2011
    Post Count: 1

    Hi,

    I have an IP in Eastern suburbs of Melb, and I'm considering subdividing the backyard and selling it onto a builder etc to build a 2/3br unit to enable me to clear the mortgage on my own home. I would retain the front home as an IP. I dont have any plans / drawings etc at the moment.

    When I bought the house 4 years ago, I checked with the council whether this situation would technically be OK with them, and I was told it would likely be approved subject to the ususal (haven't done plans etc so I know that doesn't mean too much).

    Just wondering if anyone has any tips for experience subdividing their backyard and selling it on for development?
    I'm in the very early stages of investigating this option, so any advise would be helpful.

    Profile photo of BreeceBreece
    Participant
    @breece
    Join Date: 2011
    Post Count: 43

    Hi Baysider,

    For a straight subdivision of the rear, I suggest you talk to a Land Surveyor.  <moderator: delete advertising>

    Good luck with your subdivision!

    All the best,
    Breece

    Profile photo of choppercravenchoppercraven
    Participant
    @choppercraven
    Join Date: 2002
    Post Count: 4

    Hi baysider

    I am looking to purchase an investment property in the next year or two where I do something similar to what you are proposing. I jumped on this forum because I wanted to find someone who is about to go through the process as I have never done one before. I am a property Valuer and understand a fair amount of what you would need to be done however havnt had practical experience as such. I Would like to perhaps go through the process with you and help where possible. You can contact me at [email protected]

    Hope to hear from you soon.

    regards
    Luke

    Profile photo of colinnewlandcolinnewland
    Participant
    @colinnewland
    Join Date: 2006
    Post Count: 128

    1. Sell it direct to the builder with the condition that he does all the leg work and pays the fees and expenses up front.
    OR
     2. You can go into partnership with him and divide the property at the point of sale to a 3rd party.
    What you are selling is an 'option to purchase' for a non refundable price for a set period (say 6-9 months). Make sure this figure covers the expected CPI increase in the property over the 6-9 month time frame; say $20K on a $400K property at 5%.
    This will reduce the cost to the builder as he will not buy the property from you as all he will get is an option to purchase from you. He then has the option to pass this onto the 3rd party buyer. This method is longer but will give you greater profits. The builder will be happy as well as he will not have to find the stamp duty up from nor will be have to purchase the land up front.
    You will also have to give him a right of access to the property so he can complete the project on time.
    You get the protection of having the building parcially built if he defaults as the building is 'attached' to the land.
    Work out a price for the land (with CPI increases of the expected time to complete the building) plus a % of the profit…I would suggest a set price, its easier that way. Also, if he decides to reduce the price to sell it quick, then the total reduction comes out of his end.
    I would also suggest that the property be pre-sold to the end buyer if possible….that way, the end buyer (via their bank in progress payments) is footing all the cash requirements as well.
    Its a win-win all round: the builder gets to use the land and not have to pay $15+K is stamp duty which he has to pass on to the 3rd party buyer or pay for the 20% of the land price plus interest for the time to build; you get your option payment up front plus a good %/set price of the completed product and the 3rd party buyer gets a house and land for at least $30K less (being the savings made in double stamp duty and not having to pay for the builders interest payments.
    Make sure that the builder foots all the costs of subdivision and building materials.
    Also ensure that the builder has all the required licenses, insurance, and financial backing to complete the project on time (you may look at including a penality clause for late completion). 

    Profile photo of Stacey SurveyingStacey Surveying
    Participant
    @stacey-surveying
    Join Date: 2011
    Post Count: 138

    Hi guys,

    When subdividing it is best talking to a land surveyor as your first point of call. They can help with providing all the steps involved and will know the council requirements in your area.

    Regards,
    Ashley Stacey

    Profile photo of RenoTeamRenoTeam
    Member
    @renoteam
    Join Date: 2011
    Post Count: 92

    You may want to get in touch with Troy Harris who is a developer in the Eastern suburbs of Melb. He runs a monthly property meeting called Active Property Network, he’s also on this forum. I’m sure he’d be able to put you in touch with the right people :)

    Holly

    Profile photo of christianbchristianb
    Participant
    @christianb
    Join Date: 2009
    Post Count: 386

    Hi Baysider,

    In my experience, you have several potential options:

    1. Apply to subdivide the land using a S173 agreement with the council. The land can then be sold to someone else to do with what they wish as long as it does not contravene the S173.
    2. Apply to subdivide and develop the land by making a complete TPP submission. You could then sell the land with plans and permits to someone else. Less flexibility for the purchaser, more control for you.
    3. Subdivide and develop the new dwelling, and sell the existing dwelling. There may be depreciation benefits.

    Good luck with the project.

    Profile photo of MauriceSMauriceS
    Member
    @maurices
    Join Date: 2010
    Post Count: 40

    Hi baysider,

    Just wondering how your backyard project is going?  My business partner and l have a residential construction company and would be happy to discuss your project with you if you are looking for a builder to JV with you on this project, we are located in the south eastern suburbs of Melbourne. 

    Regards

    Maurice

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