All Topics / Value Adding / Backyard subdivision? anyone doing it?

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  • Profile photo of dragon_v723dragon_v723
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    @dragon_v723
    Join Date: 2007
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    Just interested in how somersoft ppl here are doing this kind of small development before or just buy and hoid

    Are u finding it hard to sell the chopped backyard?

    Do u find the original house at the front devalued a lot like >10% after the subdivision?

    How much did u spend on in the subdivision process?including all the pro fees, council charges and utility contributions etcv

    how long did ur council take for the permits etc?

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
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    Reading your post sounds like you have already posted this on Somersoft so assume you will get answers on that site also.

    Yes many of us have successfully done the odd back garden subdivision however i for one personally like to retain my property and rent out both to increase the cash flow

    Cheers

    Yours in Finance

      

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    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
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    It comes down to the numbers. Generally speaking the numbers make more sense (especially when it comes to equity) when doing this in areas that have higher land value. I have done this to 2 of my properties (one was side by side and the other was a battleaxe arrangement). Made good money on both but only sold one as I had a good offer on the table but kept the other for cashflow, negative gearing and depreciation benefits. 

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    Profile photo of fredo_4305fredo_4305
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    @fredo_4305
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    It all depends on the situation. Ideally you can buy and hold but if you need to free up cash sell one of them, prefferably the existing dwelling, so you get the deprecation benefits but every situation is different.

    It can be harder to sell a battle axe block as it is down the driveway down the back with no street frontage, so if the existing house is average then the street frontage can be a turn off regardless if there is a beautiful house down the back.

    The other key thing is it may be 500sqm, what are nearby street frontage blocks selling for or if near by estate blocks selling for?  You cant expect top dollar for a sub divided block when comparing to the same size street frontage block.

    The existing house has to go down some what as you are taking away half of the land. Hopefully though between the existing house settingling, plans drawn up, submission and approval by council it may increase in value. A good idea is to ensure the existing is well presented externally, ie paint and landscaping, you may even be able to swing it with your builder to squeeze in an extra 10K in the building contract  and financed for the existing to be tidied up. If the existing is a dump, it will effect both values.

    Councils vary, if all utilites, driveways, fences or ammendments to the exisitng are required, plus fees, 50K, this is a very ball park figure pending councils etc.

    Permits can vary a few months up to a year pending the zoning and complexity.

    Profile photo of dragon_v723dragon_v723
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    @dragon_v723
    Join Date: 2007
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    thx for all the pros and cons appreciate it

    another question is do u have to engage a surveyor(or town planner?)  to determine if the block of land can be subdivided before making a offer to the vendor?

    Profile photo of fredo_4305fredo_4305
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    @fredo_4305
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    Speak to council yourself first.  Remember council are a business so its in the best interest to give advice and approve developments as its how they make their money. 

    From there speak to a surveyor than can take a quick look and or you can pay for a report etc. You can include a due diligence clause stating pending the outcome of your findings you can terminate the contract etc.  Like a finance clause but not.

    Profile photo of Brian_qwertyBrian_qwerty
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    @brian_qwerty
    Join Date: 2007
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    I've done a couple of these in Perth, and agree with the above posts. Both of my blocks sold for about half what I paid for the original house. But the second one was twice the price of the first. That block took a lot lot longer to sell.

    For my next subdivision I will aim for a price point where there are lots of buyers. Time is one of the biggest costs, and can cause you to run low on cash, which is not nice.

    First house reduced in value by about 10%, second by about 25%.

    Consider if you can rent the house as soon as you buy to keep cash flow. That way you just get some negative gearing while you wait for the council, etc, etc. Get a tenant without small kids and who wont mind the works nearby.

    Talk to a good accountant before you buy, there are things you need to do.

    Always be nice and polite to the council even if they are talking rubbish! In WA they can be overruled if necessary.

    Get a good surveyor and be aware of any retaining which can be very expensive.

    Profile photo of wilko1wilko1
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    @wilko1
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    What area are you in firstly because that would change all of the answers?

    Are u finding it hard to sell the chopped backyard?

    I agree with the above posts that battleaxe land is harder to sell (if incorrectly priced) then say a corner allotment subdivided land. Building a dwelling on subdivided land would increase the speed of what it sold at.

    Do u find the original house at the front devalued a lot like >10% after the subdivision?

    Have you done any work to the original house? Was it in bad condition before. Just think about what you you would of purchased the house if it wasn't on a corner allotment. ie. if it was worth 500k on corner. Yet from your knowledge of the area. Lets assume the house right next door sold 1 month earlier then yours for 400k and is in exactly the same condition. You should put in resale value 400k of the original house when working out your costing for profitability

    How much did u spend on in the subdivision process?including all the pro fees, council charges and utility contributions etcv

    Completely dependent on State/territory.

    example

    SA – Straightforward Torrens title subdivision. 25k in council charges, utility contributions, private open space contributions etc. Add perhaps 500-1000 dollars on lodging the titles.

    Add extras if you have a sewer extension, power pole shifting, Power shifting, transformer upgrades, crossovers.

    how long did ur council take for the permits etc?

    I would say council averages 10-12 weeks if your designs are correct and they don't need to go back for resubmitting.

    Profile photo of wilko1wilko1
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    @wilko1
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    dragon_v723 wrote:
    thx for all the pros and cons appreciate it

    another question is do u have to engage a surveyor(or town planner?)  to determine if the block of land can be subdivided before making a offer to the vendor?

    If you read and are able to comprehend each councils individual Development Plan. You could determine this yourself. Councils are making it easier and easier for everyday people to find the information they require. They can tell you themselves but do not take their word as you'll go in one day and get another answer the next day. Submitting a plan for subdivision for "feedback" to the council. your not actually submitting a application. just getting feedback on a preliminary drawing of the carve up of the land. Your level of subdivision though would determine getting a surveyor or building designer on board. If your doing a simple backyard corner block subdivision. working out setbacks, POS, frontage, driveways (where the sewage and power are as well) are easier to determine then if you were doing a 5 lot subdivision with turning circles, tapered driveways, POS in the form of balconies and open roof tops. You would prob want to to get your building designer and surveyor involved with that one.

    Profile photo of dragon_v723dragon_v723
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    @dragon_v723
    Join Date: 2007
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    Thx for ur reply looks like mg qu

    estions r too vague

    Hop

    wfully I will buy a block soon learn as I walk thx again 

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