Subdividing land – it sells itself right? Buy a block at one price, subdivide the land and sell the two lots at a hopefully much higher price than you paid for the original block.
It’s a great idea on paper and often brings home the bacon for the investor, but there are some things that you need to consider to make every post a winner.
Most investors are already aware that when it comes to subdivision there is a lot of red tape involved. That can be considered a given.
One thing that is very important, although it sounds simple, is that you want to buy a block that is in a desirable area. There’s not much point buying a block out in the middle of nowhere or that has little appeal for buyers. It’s a good idea to ask yourself, is my block in a desirable enough area for someone to want to buy a subdivided property in? A handy trick is to look around the area to see if there are many other sub-divided lots around…if there are it’s a sign people are happy to buy subdivided property there.
While on the subject of simple things, it’s important to buy in an area that is subdivision friendly in terms of council legislation and town planning.
Some of the trickier pitfalls involve making sure the subdivided lots will be able to connect to water, sewerage, electricity and stormwater drainage just like any other normal block – connecting these services can be problematic. It can be a good idea to hire a professional consulting surveyor to help solve problems before they arise.
If the house is old there may be heritage issues that hinder or halt the subdividing process.
Finally, one of the biggest financial surprises for investors hoping to subdivide is getting hit with contribution fees that apply to the area the block is in. Contribution fees are from some councils that are to pay for infrastructure costs such as water in developments that increase lot numbers. Investor beware because sometimes these fees can range from $50,000 to $70,000.
Perhaps the best advice is to get professional help along every step of the way despite the process seeming like on paper something you can handle on your own.
