Subdividing a property can be a great investment strategy, but for first-timers, it can be hard to know where to begin.
We've put together our guide of all the things you should think about before going ahead with your first sub development project.
Before you do anything, you need to do your research and find out what buyers are looking for. Are their even people in the area looking for smaller houses? Is the site in a high-demand or up-and-coming area? Who might be interested in purchases? There is no point going to all the effort of sub-diving in no one is willing to purchase the finished product.
Next, you will have to determine what price similar lots or houses are selling for in your area. If possible, speak to a local real estate agent about realistic prices and where they anticipate the market might be going. The initial planning process can take up to 12 months, so it's in your best interest to think ahead.
Check your zoning
Making sure you understand zoning is critical to the subdividing process. You acquire zoning information quickly through your local council or shire. The zoning codes will tell you:
- Minimum and average site area per dwelling.
- Maximum plot ratio (what percentage of the block can be used for each housing area).
- Minimum and average setbacks.
- Size of the courtyard area.
Once you know the zoning of your block, an experienced developer builder can provide you with information on rules you need to work by to obtain planning approval. Planning approval is the first step when subdividing your property, and to avoid delays, and it is essential that you sumbit the application correctly.
Things change, that's why when you are crunching the number you will have to factor in unforeseen issues. Including tenants moving out of your property (if it's a rental), interest rate risers or project time and cost overruns. Planning for these events will help you avoid any financial hardship in the future.
Site shape, size & evaluation
The size, shape and evaluation of your lot will also play a significant role in how many dwellings can be placed on your property. The shape and slope of your block can restrict access, or reduce the usable working area of the land, making construction impractical.
If you haven't purchased your site yet be careful, many first-time property developers get caught out by overlooking the slope and shape of their property. Subdivision projects can quickly come to an end if the site isn't suited.
You may not realise, but the positioning of services such as sewer, water and power runs may have a considerable cost impact on your development.
Sewer and water require a specific gradient to ensure that the service will work when the houses have been built — using gravity to assist the flow of wastes away from your property. The invert levels are also found in the same survey you would receive regarding the slope and shape of the lot. If the topography of the block is not the correct gradient for these services to work correctly, it may cost multiples of thousands to make right the levels to ensure successful development.
Another added expense is energy and water companies may charge the developer a connection fee for additional dwellings added to the existing services. For instance, if you had a five-unit site, the water corporation will charge a 'headworks' fee for the additional four dwellings for water and sewer. You can get an estimate of these cost by contacting your appropriate authority.
Define your goal
Establishing your end goal before you start your project will help guide you through the entire process. There are lots of different options when it comes to property investment you can build to sell, build to rent or even subdivide an existing property. You will need to decide what you would like to achieve and what is best for your personal situation.
Seek professional advice
Last but not least, always make sure you have a great team to support you - this is especially important for first-time subdividers. There is a range of different professionals to help you, including town planner, land surveyors, architects, lawyers, and builders. You may also need other types of consultants, including an arborist, traffic engineer, landscape architect and more.
Subdividing can be a time consuming and stressful at times, but it can also be gratifying. Make sure you put in the proper groundwork, and you are confident your project is feasible. When in doubt, always seek the advice of a professional to help you with your building journey.