The goal when you buy an investment property with subdivision potential is to buy a big block of land, subdivide it into two or three blocks, then sell it for a profit.
As simple as it sounds, you need to make sure that the development of the property will deliver you a good return on investment. You’re going to invest a lot of money, time and effort when subdividing the land into multiple blocks.
To make sure there’s a profit, we’ve listed some important things to consider when buying an investment property with subdivision potential. Here they are:
Size of the property
Obviously, you will need a large property so you can subdivide the land into multiple blocks. There are guidelines you need to comply with regarding the size of the property you can subdivide. These will vary from place to place but, in general, most local councils require a land size of at least 700sqm.
Layout of the property
The new lot size should be big enough to build a single house. The minimum size for a single dwelling is at least 300sqm. Moreover, you need to make sure that there’s ample space to install a driveway. You should allocate 2.5 meters to 3.5 meters for the driveway. This should also include landscaping.
Topography of the property
Is the land flat or is it sloping? Typically, flat land is easier and cheaper to subdivide than a sloping block. This is because slopes can limit what you can build, and the local council might require you to have a minimum single dwelling area of 300sqm or 400sqm.
Zoning of the property
Local councils have zoning rules specifying if the property is meant to be used as residential or commercial. Make sure that the location where you’re building is appropriate. You can ask your local council whether or not you need to submit a development approval.
Location of the property
Just like any other investment property, you need to make sure that your property will sell. You can ensure this by doing your market research including looking into the nearby amenities in the area. Are there any entertainment hubs, local markets, schools, hospitals, or transportation hubs close by? Location is the most important investment issue as this can dictate the marketability and cash flow of your property.
Developing a property and subdividing it brings many challenges but if you find the right property, the right builders, and the right loan it can pay off.
04 July 2012
One question that tends to come up over and over again is should a person or couple take out a loan for an investment property.