3 tips to subdivide property for profit
When it comes to wanting to subdivide property, the thought brings about dollar signs in the eyes of many. However it’s not a guaranteed money maker and it’s easy to see your profits disappear if not planned correctly.
While it might seem fairly straight forward, in many instances profit margins can be slim and a single miscalculation or cost blowout can turn a profitable subdivision into a loss-making money pit.
To help ensure you maximise your property subdivision, here are 3 tips to help you win.
- Do you know the best use of the property?The zoning of your property will determine the number of new lots or dwellings that can be created or built. However, there may be clauses in the local planning scheme that allow for greater density, such as design bonuses or lot variations, for example. Speak to a town planner or project manager to understand how to maximise the potential of your block when subdividing.
- Research the costs involvedThe costs to subdivide property vary from state to state, and will depend on how many new lots are being created. Make sure you have a thorough understanding of all the costs associated with a subdivision. Typical costs will include:
– Land surveyor fees for subdivision plans, cadastral surveys, subdivision clearances and preparation/lodgement of subdivision application.
– Application fees to the local planning authority to assess the subdivision.
– Connection fee for water head works
– Connection fee for power supply works
– Conveyancer fees for application of new titles
There may also be other fees required including demolition fees (in cases where an existing dwelling needs to be removed), contractor services fees (for required civil works) and contributions to local council amenity initiatives.
- What’s your plan – to hold or sell?It’s important to have a clear plan in mind as this will have a big influence on many of your initial decisions and final profit. After you subdivide the property, do you plan to sell the vacant land? Or, in the event that you build on it, do you intend to sell the dwellings or hold them for future capital growth? Perhaps it’s a mix of sell some and hold some. Detailed calculations need to be completed to determine estimated profits, impacts on your cash flow from holding property and relevant tax implications from selling property.