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Block selection process for future subdivision

Discussion in 'Development' started by smokyjoe, 11th Oct, 2016.

  1. smokyjoe

    smokyjoe Active Member

    Joined:
    22nd Jun, 2015
    Posts:
    41
    Location:
    Melbourne
    Hi,
    I'm in the market for a property with the intention of subdividing a few years down the track. I'm looking at 600-700 sqm blocks with an existing 3br house that will be rented out in the meantime, with a subdivision in around 5 years time. When we subdivide, I'm not sure whether we'll:

    • Retain the original house at the front (probably not, judging on the appearance of properties in our budget/location)
    • Subdivide and sell the land only
    • Subdivide and build ourselves.
    I know there are a lot of unknowns here, but what I'm trying to understand at the moment is what are the things I should be looking for in a block?

    For example, I know that the more street frontage, the better (assuming 2 or more units can have street frontage). But how much better is it? Is a block with ~30m of street frontage worth, say 20%, more than one with 15m street frontage?

    Another example, a friend of my wifes is subdividing their PPOR, and because they're on a main road, they need to allow a turning space in the driveway, so that the occupier of the rear unit doesn't have to reverse in/out. I certainly would not have known this.

    Based on my current understanding (which is not much), and my budget, I'm looking for:

    1. As close to, or above, 700m2 I can get
    2. Flat Land
    3. No easements, significant trees etc.
    4. Ideally not on a main road
    5. Ideally within 2 km of train station
    6. Original house on the front half of the block (in case we want to retain)
    7. Where similar sized blocks on the same street/area have 3+ townhouses (this just gives me some comfort that we'll be able to subdivide into 3 or more later)
    I'm doing my DD on the area, demographics etc., but I don't have a good understanding of subdivision feasibility, and what specifically to look for blocks. Any general advice, or any checklists/resources I should be looking at?

    Thanks
     
  2. smokyjoe

    smokyjoe Active Member

    Joined:
    22nd Jun, 2015
    Posts:
    41
    Location:
    Melbourne
    Just to clarify, I know to check all the setbacks, zoning etc. with the council.

    I guess my question is not so much whether a block can be sub-dividable, but what attributes make a block attractive for subdivision.
     
  3. Turbo_C

    Turbo_C Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    51
    Location:
    Mackay
    Hey smokyjoe


    First thing i might suggest is that your not planning on sub-dividing/developing for 5 years then what you are doing is purchasing a buy and hold IP, so make sure that it meets your crieteria for that foremost, plans can change and life goals regularly do change over a 5 year period.

    With that said and in answer to your question
    Minimum lot sizes is obviously an important one. But consider that in itself is only one part of the equation. Sub-dividing a standard 1 into 2 battle axe configuration for example, did you know such things as;
    Access handle is not necessarily included in your lot size
    Rear lot may need to have views to wide open spaces to be considered for approval

    Dividing the lot size in half to produce a result that is over the minimum lot size doesn't automatically grant you 2 lots. Be aware
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    There can be a GST issue that affects land bought from land developers that can affect your profit. It can mean a fair % of profit is affected. If you cannot sell the subdivided lots under the margin scheme profit can be reduced by around 30% as an example. Most land developers sell to buyers under the margin scheme and that prevents you using it.

    Developer land is often so small you cant subdivide. Thats where they make $ and their council will impose land sizes that dont allow development further.

    Try buying land that is existing residential use with a knockdown intention and the outcomes can be different. Perhaps even claim a scrapping deduction and get some neg gearing in the interim period.

    Further info in our developer toolkit

    Tip : Get familiar with a good town planner. They can advise on land use to max profit.
     

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  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    Size....Length, width and M2. Bigger the better
    Access
    Local govt limits on size, density etc
     
  6. boeman

    boeman Well-Known Member

    Joined:
    30th Mar, 2016
    Posts:
    97
    Location:
    Perth
    Find out where the sewer sits.
     
  7. smokyjoe

    smokyjoe Active Member

    Joined:
    22nd Jun, 2015
    Posts:
    41
    Location:
    Melbourne
    Thanks all for the tips. I've been reading the council subdividing and building rules to help get me to sleep at night. Having a look at similar block sizes and how they've been developed (or what the plans look like) has also helped, but I see many instances where the development doesn't seem to comply with rules. The most notable example is the front setback in Hume Council. It's either 9m or the average of the surrounding properties, but I see quite a few developments where the abutting allotments are 9m, and the new development is far less.

    Still not exactly sure what our strategy will be yet. I'd love to develop multiple town-houses, but given that I don't know what I'm doing, and we probably couldn't borrow enough for this in any hurry, it's not something I'm seriously focusing on. The other option I'm looking at (besides a simple buy &hold for now) is subdividing into 2, retaining the original house, and building a townhouse at the back (and keeping both). Gotta work out whether we can finance that at the moment though,

    Paul, thanks for the tax tip. I plan on buying an established house. I do need to understand the implications of GST if we subdivide, build, sell/retain, so I'll have a look through your developers toolkit. Thanks
     
  8. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    212
    Location:
    Perth
    A lot of people mention this and I'm afraid to say I'm pretty ignorant on the subject. Where does one want/not want the sewer to be? On your side of the street to reduce connection costs? Or is the issue around making sure there are no easements on your block?
     
  9. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,673
    Location:
    Perth
    I was talking to you about a block in Cloverdale we are building a townhouse on. The sewer runs inside our block for a section heading to the back and then along the back. There is no easement.

    However, Water Corp has regulations about how close you can build to a sewer. We need piles to build the townhouse. It's not that the piles are very expensive because they really aren't. It's more about factoring the costs into your feasibility so you know up front if it stacks up. Sewer lines within properties without easements are common in my area.
     
  10. Tufan Chakir

    Tufan Chakir Well-Known Member

    Joined:
    18th Aug, 2016
    Posts:
    73
    Location:
    Victoria, Australia
    If you find something you think you might look at seriously pay for some good advice from a planning consultant.
    There are ways around many apparent constraints, and many hidden timebombs as well
     
  11. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
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    212
    Location:
    Perth
    Got it. Cheers!
     
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