Could subdivision be the right choice for you? We look at some of the considerations when it comes to devising your plan.
If you are considering different investment strategies, subdivision is highly logical choice. It involves splitting a large sized block of land or property in two or more properties, potentially earning twice the profit as you would get for a single property or piece of land.
Although subdivision makes perfect sense on paper, the reality can often be more complicated. There’s a certain degree of red tape involved, and not all properties are eligible for a profitable subdivision.
Signs of a good candidate for subdivision
On the most basic level, a property needs to be in an area where subdividing is allowed according to local town planning council legislation. It’s also best to choose a property in a popular area if you want the venture to be profitable. There has to be a high enough level of demand that renters or buyers would be willing to pay for a subdivided property. One way to suss this out is by determining whether or not there are similar subdivided properties nearby. Inner city properties tend to be good choices for strata subdivision, with land limited. However, the outskirts of a city give you more room for creativity in your design. As you’re assessing the property, keep these tips in mind:
- Pay for a survey of the land for an accurate record of land size and easements. Get a diagram of the sewer, so that you can determine whether it would be cost effective to extend it to a new lot. This will also depend on the site’s slope, for drainage purposes.
- Compare the market value of similar properties nearby, as well as vacant land in the area.
- Research all zoning regulations in the area, and find out what the local council’s subdivision guidelines look like.
- Properties in areas with existing service connections will require less investment.
It’s difficult to conduct all of the necessary checks on your own, so don’t hesitate to contact a professional solicitor or surveyor for advice regarding the local regulations.
Costs to be aware of
There are a number of factors that can impact the cost of a subdivision. You may have to pay for new service connections, along with surveys and zoning reports. If your land is in a rainy area, you may need a report from a hydrological engineer, which can cost up to $5,000. Older lots may also be subject to heritage issues, along with the cost of demolishing an existing property. Some councils levy contribution fees for infrastructure costs as well. Be sure to budget for all these possibilities, including the costs for legal fees, surveyor services, stamp duty, and civil works.
The Bottom Line
Whether or not subdivision makes sense in your case depends on a variety of factors, including location and zoning laws. Some states require roads or utilities to be installed before the land can be sold, which can bring up the cost involved. It’s helpful to do your research and consult with a local attorney who is well-versed with zoning and subdivision laws.