Beginners guide to profitable property subdivision

You may have heard, subdividing a larger block of land into two smaller lots can bring in sizeable profits and for good reason, as subdivision can provide a bigger and quicker profit when compared to buying, holding and selling an established property.

And for this reason, increasing number of investors are seeking out large blocks and seeing strong returns by subdividing land. Even the most inexperienced developers can achieve a healthy return through subdivision by considering a few basic rules.

Subdividing a larger block into two smaller lots can be a very effective and affordable development strategy and a great way to potentially double your returns.

So, let’s look at what the basics considerations are when contemplating a subdivision project;

Build or sell after subdividing?

When subdividing a block of land, site owners are commonly faced with an important decision and two options: build on the land, or sell it.

Both options each have their pros and cons and you should weigh them up carefully before making a decision.

Either way, you should expect to pay anywhere ranging from $70,000 to $100,0000 in development costs, and you need to be aware that different properties and property zones will have different rules and regulations surrounding subdivision.

Due diligence – and often perseverance, particularly when it comes to council approvals – will be essential. Contact your local council and explain what you are trying to do and get cost estimates as well as advise on planning guidelines before you start.

Why should I sell?

Subdividing and selling off a smaller block of land will provide you with an immediate cash injection and is a popular strategy precisely for that reason. It is usually most effective in locations where land is scarce and higher density living is common.

The amount you’ll earn from selling the block of land will obviously depend on the size of the lot and its location. But you can expect to turn over a relatively quick profit – plus avoid any continuing costs, such as maintenance.

Why should I build?

Subdividing and selling the block of land will provide short-term benefits; building on the block of land, however, can really open up a raft of longer-term opportunities.

The costs of subdividing and building will obviously increase, as you can expect to pay the initial subdivision and development fees, as well as the cost of building a new property.

But while this might require substantial capital at the outset, you could potentially make larger profits.

Holding onto the new property will then provide a longer-term source of income in the form of weekly rental payments.

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This article via Which Investment property does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.