Size alone does not determine the success and yield of a property subdivision.

Planning for a Property Subdivision [Swarup Dutta]

Useful , tactical information for property developers in Melbourne. A light read may change your opinion if size matters or not.

 

As with any successful investment, due diligence matters the most

 

Size of the parcel doesn't matter, it's how you use it that counts

 

Size does matter

the yield and amount of money made - what lands in the bank, will be more with a bigger subdivision.

A bigger subdivision is always riskier - more risk more gain.

As for success - The bigger the person doing it the more successful it's going to be.

Someone who doesn't know what they're doing will stuff up even the smallest subdivision and make a loss

 

Large subdivisions where developers purchase entire neighbourhood and put in roads and infrastructure and housing and commercial will obviously make more money than a small hammerhead subdivision in somebody's backyard

 

Hmmm ... Really!!!!

 

But with that bigger risk comes the risk you may end up making nothing, losing money or just a small sum that is smaller than doing something smaller.

The potential is that a bigger subdivisions with more blocks, in the right hands, will make the same percentage ROI than a small one but that percentage is a larger amount of cash.

The other thing that matter more than size are:
- infrastructure - location of water, sewer, power
- location
- amenities in the area
- end product - extremely odd shaped blocks aren't popular

 

Lets also not forget the opportunity cost.
It is likely (though not always) that a larger development will take longer.
Taking a very simple example, if you double everything.
You could do a $2mil development which takes 3 years to complete at 20% margin.
Or you could buy 2x $1mil developments which each take 1.5years to complete. Also achieving 20% margin.
Returns in are exactally the same in both %terms and $$ terms or the two comparisons.

Which is better?

To simply say 'bigger is better' is overly simplistic and doesnt account for the multitude of factors which needs to be considered when entering into a transaction.
Working such hypotheticals is also impossible, as the real world doest fit into such a neat package.

Blacky

 

Together with the bigger the more complex the financing is.

But seeing as I've just read the article rather than assuming what the thread was about. I agree that size is only one thing that matters when it comes down to the viability of a subdivision. In this case linked by OP the buyer bought a block that met the mathematical size requirements for subdivision but failed to account for everything else which meant the block was unsuitable for a 4 dwelling subdivision.

 

well said Westminster. The article says the story and what to look out for to succeed -size alone does not assure subdivision success

 

Xena warrior princess , have you done a few subdivisons ?

 

yes I have light bulb - Adelaide western suburbs
They were small ones - 3 on a block.

also in Northern suburbs, we have subdivided and sold blocks of land and renovated houses but nothing was built. We've only done building in western suburbs because resale values stack up better there for us. Also we know the areas very well.

 

i was initially thinking size doesn't affect yield, as the same yield is possible for both.
but further thinking about it, larger blocks are easier to get higher yields.

 

my thoughts remain the same.
those issues in the article can affect any development, of any size.

 

Have you???

 

I agree - there would need to be a higher yield to counter the higher risk

 

Smaller 2 deve of course.
ROI seems to be ignored but is important.

I prefer shorter timeframes with developing because we have no control of the markets and they can turn, the longer in the market perhaps the higher the risk.

MTR

 

No I havent.

 

This. Walk down any central street of our capital cities and look up. Some of those towers are on 1/4 and 1/2 acre sites. Huge value because of highest and best use. At the end of the day all developing is finding a higher use, buying on the low use, converting. Farm>surburban resi or suburban resi>medium density or medium density>high/commercial etc etc

 

Is this the link?

Planning for a Property Subdivision