subdividing property

Are you a homeowner interested in subdividing property for development?

In years gone past, the best way to generate capital growth from real estate was simply to wait for the land to appreciate in value.

Many families that bought homes in the late ’80s or early 90s who ended up selling 20 odd years later were in for a nice payday.

But what if there was a way you could maximise the value of your property?

There is a way, and that is through subdivision and property development.

So, let’s unpack what you – as a homeowner – need to know about subdividing property for development.

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What is a Subdivision?

subdividing property for property development

First, let’s explain in simple terms what subdivision is.

Subdivision is dividing a piece of land into two or more separate titled lots.

You’ve probably seen blocks of your land in your area get subdivided.

An older house is knocked down and spring up two, three or sometimes more townhouses in its place.

We call this process residential property development.

Essentially it is building two or more townhouses on one piece of land.

Next, we’ll explain why people do this.

Why Would You Subdivide Land?

There are a few reasons why homeowners choose to subdivide their land for property development.

One of them is to maximise the value of their land.

By building two or more properties, these properties are then sold for the market rate.

This means that you will usually see more money than if you sold the house and land on its own.

In addition, if they’re sold off the plan, you don’t need to wait as long for settlement.

But that’s just one reason why a homeowner might subdivide their land. There are a few more reasons.

More Reasons to Subdivide

Another reason is that you might want to downsize but not leave your suburb. This is understandable. After all – we all put down roots where we live.

It can be harrowing and even heartbreaking to move out of our area, where all our friends, interests and beloved places are.

By subdividing and building a dual occupancy, you can stay in the same street by living in one. Then, it’s up to you if you want to sell the other or rent it out for an investment property.

Many people do the latter to guarantee a steady stream of passive income.

Also, another reason homeowners subdivide is to assist their children. They might build two townhouses on their lot and sell one at a discount to their kids.

Furthermore, they might even give it to their children. This can occur in older adults whose kids want to stay close to them to look after them.

These are some of the reasons why a homeowner might choose to subdivide their land.

Now, a word on the value of the physical property (homes) and land.

Land Appreciates and Houses Depreciate

You’ve probably seen old, beat-up homes in booming suburbs go for crazy money.

It’s not because the homes are desirable – the land has value for buyers.

Homes depreciate with time and age. Things break, cracks appear in the walls and ceilings, and after a certain time, they need significant works. Things like re-stumping, foundation repair and other major works are costly.

Let’s give you an idea about how long a home’s typical lifespan is without significant repairs. The Australian Tax Office allows an investment property to depreciate over 40 years.

So that’s the typical duration of bricks and mortar home.

However, while the house is depreciating, the land (especially in cities) is steadily appreciating.

Let’s give an example. Take a home purchased in the early ’90s for around $80-90 thousand dollars.

Depending on the suburb, that home and land will fetch anywhere from $800-900 thousand to over a million.

Even considering inflation, that is a jaw-dropping amount of appreciation.

So, you can now see that the value of real estate lies in the land, not the house.

How to Subdivide a Property

Now for the rest of the article, we’ll explain how to subdivide your land.

Can I Subdivide my Land?

This is the first thing you need to find out.

For various reasons, some lots just aren’t suitable for subdivisions.

This can be due to zoning issues – for instance, if your home happens to be situated in an industrial zone.

Another thing that can make subdivision difficult is if your home has easements on it.

These are sections of the land that might need to get accessed by utility companies, for instance.

Another thing that might make your lot unsuitable for development is the dimensions.

Some lots aren’t big enough for subdivision. Others might be on restricted residential zones, which specify a minimum lot size – making subdivision impossible.

So, if your land is suitable after all that, what’s the next step?

Plan of Subdivision and Next Steps

Land cannot get subdivided without a Plan of Subdivision or POS.

This is what you submit to the local government (read council), who will approve the subdivision, allowing the project to go ahead.

There are a series of tasks you need to complete with your POS.

You will need a series of surveys undertaken at your site. A professional survey can do this task.

The surveys they will do are:

  • A re-establishment survey
  • A features and levels survey

Then, you will need some preliminary drawings of the development and a planning permit. You will need to understand the town planning process.

Now with your drawings/designs – don’t neglect to consider what is called neighborhood precedence.

This means that plans for dwellings that are like similar to homes in the area are more likely to get approved.

If your architect designs a wild and zany property that is entirely out of step with the area, you will see more objections, and it might not get approved.

Statement of Compliance

After a few more steps and more paperwork, the local council will issue you a Statement of Compliance, which is the green light for your subdivision to go ahead.

At this stage, you’ll want to engage a solicitor to lodge this paperwork, along with your land’s original title, at the titles office.

You will then get your new, separate registered titles.

Now, this can take some time to happen. This is because you are at the mercy of bureaucracy. You want to be firm with your solicitor to ensure they lodge it ASAP.

If there’s a mortgage over your land, there can be a further delay. This is because the bank needs to release the title. Again, this is a job for the solicitor. This can mean more delays, unfortunately.

Now in this game (as a property developer), time means money. Delays are costly. So you want to have all your ducks in a row to achieve your subdivision.

You’ll Need to Engage a Builder

Our last bit of information to share is about subdivision builders.

Now, if you’re subdividing your land, you will have an overall budget. This will dictate how much you can spend.

This will matter when you choose a builder.

There is no way you can afford a luxury builder on a tight budget.

You need to have an airtight budget, and not vary it.

If a builder won’t or can’t work to your budget, keep looking.

However, with that said, the cheapest quote is not necessarily going to be the best. A cheap as chips quote can indicate that the builder will do a shoddy job and cut corners and leave you with subpar properties.

Volume vs Independent Builders

You’ll probably face a choice between a volume builder and an independent, or smaller business.

The volume builders are the brand names you’ll recognise from billboards and other advertising.

With lots of homes on the go at once, they rely on volume as their business model.

They can be cost-effective due to their high turnover, but you’ll receive a less personal service.

Whereas an independent builder can offer a more tailored experience for a slightly higher cost.

Again, it will come down to the budget you’ve set and what you want to achieve for the townhouses.

Wrapping Up

In this article, we’ve shared what homeowners need to know about subdividing property for development.

We’ve covered off what subdivision is and why you might want to do it.

Also, we’ve explained some of the processes of subdivision.

Finally, we’ve touched on townhouse builders and shared some tips about them.
By now you have the knowledge you need to undertake your own subdivision.