My search for land to subdivide

Hi all,

after a couple of buy-and-hold IPs I have decided to give the more active IP business a go.

My goal is to buy a subdividable block of land within the next 6 months and have given me roughly:

  • 1 month to find four areas I will focus on researching.
  • 2-3 months to do detailed research and narrow these four down to (something that makes sense, but probably) 2.
  • 3 months to follow the market before considering to buy.

So I have done quite a bit of research on this topic already (including this forum, Terry Rider's reports, API, etc) and am quite clear on:

  • What this land should include (a dwelling that can stay, so that I can sell off the empty back of the block).
  • The time it takes for such an adventure (~18 months).
  • The costs associated with a subdivision (~20/25k).
  • The price I can pay of a suitable block (up to 500k (incl. dwelling)).

I don't see the value in looking in FHB areas, nor in areas where there are not already a number of subdivided blocks - but apart from these two points, I cannot find other criteria that help me narrow down potential areas. (Well, the council's requirements on land size is a given).

So at this stage I am considering to merge API and Terry's information (of course SS input too :)) to get to these initial 4 areas, but was wondering how you guys go about narrowing down the areas suitable for subdivision - any input is highly appreciated !


Cheers,

Void
 
Based on whats happening up here in SEqld, the state government (and various local governments around the place) are looking at increasing densities in established areas within the 'metropolitan' limits of a city or CBD.

This would lead me to identifying areas in allready established locations, offering potential for subdividsion on larger plots.

This gives a little assurance that provided you do the research, you should come out the other end with a smile on your face.

Whether Dual Occupancy, Multi Unit Dwellings or subdivision would all be considered.

Obviously, in finding your location, you will need to revert to town planning codes, to ensure what you want to do is able to be done.

A number of plans are being revised up this way with council, so may need to investigate this whenever you decide to move to the next level.

Cheers,

F
 
Resale of new properties in the area is also a key to look for as is precedence of the type of house to be built, ie single or double story.

This is all factored as profit in your feasibility study.
 
We just did this exercise for a client, and it proved to be a whole lot more difficult (work for us) than even I had anticipated. It took about 4 months work on and off.

Firstly, I would say to you that you need to be looking in an already high demand area. There is no use sub-dividing something and ending up with a block of land that no-body wants to buy because it is either not a great area or it is cheaper to buy an established house than it is to build on land from scratch.

So choose your area/s first. The get council's requirements, not just for block size, but for frontage. Some blocks are big enough but not wide enough according to their regulations. Also factor in if the zoning allows for what you want to do. Also the slope on the land must go to the street or you are up for very expensive pumping to get sewer uphill.

Then you need to find the positionings of services like power, water & sewer. You don't need the expense of moving them or encasing them in concrete.

One of the issues we faced was that buying land suitable for sub-division was something that every developer wanted....and so the areas had been "raked over" by others before us.

However, we were able to go one suburb out and find what we wanted. It was a corner block with 180 deg riverviews and an old house on it. Worth about $600K. Chopping the back yard off gave us a block worth around $300K and only decreased the value of the house by about $50K. So this showed a $250K profit before subdivision and other purchasing & holding costs were taken into account.

I think if you paid a buyers agent, in the area you are looking in, something like $9-10K to source this for you, you'd save all your 6 months worth of whatever it was you planned to do fiddling around, and you could just get on and make your $100-200K and move onto another shortly thereafter :D
 
I've said it before, but there is a 23000sqm block of land here available to subdivide. No price, but probably around the $300k mark, give or take. Maybe more. It is a triangular block with one access road in, and is in a really prime regional location.

Not sure what kind of profit is in it though. You'd get at least 16-18 blocks out of it, if not more if you go smaller @ $60k each so about a million bucks if not more at the end, but you'd have to get roads, power, water and STEDS put in and I have absolutely no idea what that costs.

I am in absolutely no position to do that myself, I don't think anyone would give someone on a maternity break a commercial loan for this kind of project :)
 
Subdivision

Bigger is not always better. We are currently embarking on a 3 lot subdivision and through research found that buyers prefer a smaller subdivision rather than a multi-unit site. Sometimes a dual occ or triple has greater appeal than say an 6 or 8 unit site Just my 2 cents.
 
Prop, what were the GST implications for the above mentioned project?
Sorry for the late reply Gools.

The GST implication, in an absolute 'worst-case-scenario' I would imagine to be that the sale price of the new block, at $300K, would be GST inclusive - so $27K. But there is so much fat in the deal it is still very profitable.

However, I would defer the the accounting fraternity to come up with some clever ideas as to how that GST figure would/could become less ;)
 
Hi Void,

I am finding it hard to compete with local builders atm for sub-dividable properties.

Word of mouth and private listings may be the way for me to "move forward"!

(I was in the July issue of API magazine with the subdivision)

Mike
 
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