Subdividing for Profit: How to Split a City Block and Make Money

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It’s hard for many people to see how they can possibly go wrong in a subdivision. Most of us here stories on a regular basis of people who subdivided their land for a profit. And, it’s true. You can make a profit subdividing your land.

If you live in a high demand area and you own a reasonably sized piece of property, then there is every reason to believe you could subdivide that land for profit.

This is particularly the case in sought-after areas such as Sydney or Melbourne.

Popularity is Key

Popularity is a crucial factor in deciding to subdivide land or purchase that land for later subdivision.

And one of the easiest ways to tell if your land would be amenable to the subdivision is to take a look at the number of properties being subdivided in the area.

Not determinative, but it is indicative of lands that are likely candidates for a subdivision. It suggests that there is a good market for buyers who are willing to purchase properties that have been subdivided.

Conveyancing and valuation are often easier in areas where a subdivision is common. This is an important consideration since Conveyancing will be required at some point in the process.

Getting Professional Advice and Support

  • Conveyancing
  • Valuations
  • Feasibility
  • Local Council

Anyone who is thinking about subdividing their land in order to make a profit will need to surround themselves with professional and experienced help.

It may be tempting for some investors to try and do everything themselves. But this would be a mistake.

Feasibility studies, for example, can be complicated and professional help should be sought.

The same holds true for conveyancing. Not all conveyancers are equal, And it is often prudent to go with a conveyancer as experienced in your particular neighbourhood.

Not only are they familiar with the land but they also familiar with the local council and other local regulations for your area.

A Sydney conveyancer would be the best person to speak to if your property is in a high demand Sydney Urban area, just as a Hunter Valley conveyancer Most suitable person to speak to if you’re living in regional Newcastle or the Hunter Valley.

The professionals that you gather around you are going to help you with every aspect of land subdivision and ensure the process of due diligence.

Due Diligence

  • Land Size
  • Dimensions
  • Zoning

The process of due diligence involves investigating three areas in particular. In order for your property to be eligible for subdivision, You will need to demonstrate that the two new properties adhere to local council and planning regulations.

The first of these requirements have to do with property width and the second has to do with the overall area.

The 3rd obligation to consider would be zoning as some zoning designations will not allow a subdivision to take place.

Each council will have its own policies, and this information is readily available in your Town Planning office or online.

Utilities

  • Water
  • Sewage
  • Power
  • Gas
  • Stormwater and Drainage

Utilities are easily overlooked in the subdivision process. To determine whether the property is suitable for subdivision you need to go beyond land value, Council obligations and property demand.

You need to also consider basic utilities such as power, gas and water, drainage and sewer.

Electricity is usually straightforward, as is water. Sewage and stormwater systems can be more complicated.

One of the complications is that it may require the cooperation of neighbours. This is often a point of controversy – especially in the case of storm water drainage which often involves boundaries.

While most neighbours are willing to co-operate, there can be complications, and it is best to discuss any issues ahead of time rather than after the fact. In fact, some councils will require neighbour consultation approval before they will proceed with an application.

Weighing up the Additional Costs

  • Environmental Studies
  • Hydrology
  • Contribution fees

Apart from setting up the new utilities for a subdivided block, there are some other factors that will impact and determine the overall cost of the subdivision.

If your local council believes that the property may have an impact on ground level water flow it can invoke the services of an hydrological engineer. The fees for an hydrological engineer can be upwards of $5,000 and can take a couple of months to complete.

Again this is a good reason to engage a consulting surveyor or conveyancer from the start. They will be in the position to give advice ahead of any application.

Properties that are over a century old can also increase costs. In some cases, Heritage impact studies need to be undertaken. This is especially true when old dwellings and buildings are on the property.

One more thing to consider regarding unexpected or surprise costs are those costs related to contribution fees.

Contribution fees will be levied by some councils in New South Wales to cover the cost of infrastructure, Sewage and water supply are two examples.

In Urban and Sydney areas, this could be more than $50,000.

Doing your homework is critical. The unexpected amount of $50,000 in contribution fees can Hope the project is definitely and turned it from a profit making venture into a financial burden.

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