Have you considered subdividing your land, or more specifically subdividing your block before building?
Well, stick around because in this article I am going to step you through this exact subdivision process as well as break down and explain the situations where this makes the most sense.
Let’s get into it.
Not to say that it never happens but it is definitely less common.
A strategy like this is employed because it gives the landowner the ability to sell one (or both) of the lots. Without having the fund the build.
We’ve leveraged this exact strategy a handful of times over our journey when our clients have been short of funds.
It is important to note that you do give up some of the profits given the big profits are when you build and subdivide.
But if you have no other finance options then this strategy makes every bit of sense.
Essentially, we’ve subdivided the land first. Facilitated the sale of one of the lots and our client has then taken the funds from the sale of the first lot to fund the build of the second lot.
Not sure if you can subdivide your property? Learn more here.
Typically, when subdividing land you would undertake your plan of subdivision whilst you are building. This is the preferred and easiest way.
BUT if the plan is to subdivide your block before building then the order in which you execute your project will change.
Essentially those tasks that you would complete in parallel with the build you need to bring forward. And get them completed prior to the build commences.
You will still need to get your site surveyed. Complete the preliminary drawings and achieve your planning permit and endorsed plans as you normally would.
- Site surveyed
- Preliminary drawings
- Planning permit
It’s when you get to the plan of subdivision and its relevant conditions where things take a different direction.
That brings us to the conditions.
It’s these conditions that you would normally start working through in parallel with the build.
But in this strategy, each of these conditions will be required to be completed prior to the build.
Your goal is to achieve subdivision approval so that one (or multiple) of the lots can be sold of independently.
All subdivisions are going to have different requirements and conditions relative only to the specific site.
Some of these conditions might include:
- Power pits
- Water approval
You’ll need to complete the demolition of the existing dwelling because the council won’t give you a statement of compliance if there is a house sitting over the proposed boundary.
Then you have the 173 agreement. This is essentially an agreement between the council and the landowner that what has been approved as part of the planning permit will in fact be carried out by the landowner.
This will appear on the title, so any current or incoming owner is aware of the agreement and/or relevant restrictions.
A Section 173 Agreement is a contract between the Council and a landowner that places restrictions on how you can use the land.
After you’ve completed all of the required conditions you will get your statement of compliance which you can then use to lodge into the titles office to get your registered titles for your new subdivision.
Once you have the new title the lots can be sold off individually.
This is where we have had clients doing dual occupancy projects in the past sell one of the lots to fund the build of the other.
As simple as all of this may sound it can be complicated and tricky when it comes to building the approved dwellings.
Ideally, you want to sell the first lot to someone happy to undertake their part of the build in parallel with yours.
Given dual occupancy project designs generally have a shared wall somewhere in the development, building together makes the most sense from both a practical and financial standpoint.
For more information on the process of building a house click here.
When subdividing land this kind of strategy isn’t the way I would typically suggest you would run a townhouse development project such as a dual occupancy.
There are many ways to approach a project that are all client and project-specific.
This particular way can help landowners with lots suited to doing a dual occupancy project that may not have access to the required funds. This gets them in the game. Speaking of funds, learn about the costs to subdivide here.
Yes, there is greater potential to make more money. If you could afford to fund the build of all the dwellings yourself. But ultimately you need to get on the merry-go-round wherever you can.
All projects are different and should be treated as such.
Just because something works on one project at a particular moment in time. It doesn’t mean it will work on another at a different time.
When it comes to subdividing land, I can’t stress enough how important it is that you do your own research for your own project.
My goal, as always is to get you heading in the right direction.
Want to learn more about how the team here at Little Fish can help with your townhouse development project?
Give us a call 1300 799 277 we would love to hear from you.