Apartment Block Build - Subdivision & stratta questions

[hb40]

Hi,

I am looking at developing a small block of apartments in Melbourne.

My understanding is that:

- Subdivision: is subdividing the lands under the apartment block into parcels, one per apartment. This needs to be done and approved via the council before selling the apartments off the plan (well before build)
- Strattatitling: this is putting each apartment into a seperate stratta title. It can be done anytime but doing it before the build is cheaper? what's the benefit of stratta titling? why do apartments go up in price post a building being stratta titled?

Thanks

 

[Aaron_C]

Hi hb40,

Subdivision - Technically speaking you do NOT need council approval before you can sell apartments off the plan. All you need is a draft plan of subdivision, which any licensed land surveyor can do for you. Of course, most developers prefer to get the council approval first because otherwise no one would buy it and even if they did, changes to the original plans (which are common) can render the original contract too different to the final product and cause it to be void.

Strata titling: Under our laws the 'strata title' means that each unitholder is entitled to the 'airspace' between the walls of their apartment complex. Everything else is common property, belonging to the Owners' Corporation. So you CANNOT do it before building because strata title is dependent upon the actual building being built.

You are confusing the concept of subdividing first with normal land, being subdivided into smaller lots but still retaining FREEHOLD title. Now, that is possible for townhouses/houses etc but most developers do not do the subdivision of land first because you have to put all the essential services (water, gas, electricity etc) into the land before you can subdivide - which wastes time because you are going to do it anyway as part of the building process. That is why most developers build first, then subdivide later as it saves a good 3-6 months.

As for your final question (about why apartments go up in price after strata titling) - that is because in property, smaller parts (strata titled units) always sell more combined than one big building on one title. That is how developers make money.

 

[hb40]

thanks

Aaron, thanks again.

so...

1) I get a draft plan of subdivision - Land Surveyor
2) I get council to approve this
3) I do the build
4) I do the sub-division (through council? expensive?) as per the approved plan post build and pre-settlements on apartments
5) If I choose to I can also strattatitle the apartments (is there much value since they were already sold off the plan? or do I need to tell the buyers the the final stratta state once the build is finished before they buy?)

On a side note, aside from the architecture, build costs, subdivision fees, what are the other development related costs before the settlements take place? I heard something about council contributions? who else wants a piece of the pie?

Cheers

 

[Aaron_C]

If you are selling off the plan you have to strata title the units otherwise how are you supposed to complete settlement?

 

[hb40]

ah

Ah ok. That makes sense!

I've just seen these blocks where they haven't been stratta titled at all, which I assume means the block was not sold/owned by multiple people.

What's the best way/timing to minimise the cost of stratta titling? ... I knew there would be a lot more expenses along the way to account for

I am starting to talk to James from House of Wealth as Mike recommended, but I'm trying to get up to speed where possible before hand. Total newbie!

Cheers

 

[Aaron_C]

You can't minimise the costs it is all done by the land surveyor you engage.

Blocks that have not been strata titled are usually those older units built long before strata title was invented. They are either all on one title or have something called 'company title' that is a pseudo strata title but is quite badly structured.

 

[hb40]

Stratta

Hi, if I was to hold onto all the apartments in a new apartment block build, would I still need to Stratta title them? or can I can keep them all in the one title until a future date?

I'm trying to reduce my upfront costs before the build is finished and rented out So if I can get private financing maybe I can keep the lot and rent them out for the time being since the rental will cover the repayments and then some.

Cheers

 

[Aaron_C]

You don't need to pay 11-12% for private financing....no way!

 

[hb40]

private financing

Aaron,

how does private financing work? I know nothing about it!

There's a mention of it being low paper work, subject to the project roi as opposed to my personal cashflow, higher interest rate (11%?), can cover the interest repayments as well, 60%LVR on the end value (so would cover the construction costs)...

Also is it feasible not to stratta title if not selling initially?

Thanks