Continuing with property investing with advanced strategies and types of investment properties you can profit from, this week we look at splitter blocks or sub-division.
Put simply, subdivision or splitting a block is the conversion of a single title to multiple titles. This is a great way to add value to the properties and allows you to sell them off individually.
This is a great strategy because of its flexibility – you can sell off a newly subdivided piece of land to reduce your loan or you can hold on to the land and add value by registering the new lot and building a new property.
If you are going down this path, however, it is important to remember that first, your plans must meet council regulations and in particular, the minimum lot size permissible by the local council.
Lot sizes vary from council to council so it is imperative that you do your homework to ensure there is enough land to sub-divide.
If you can move ahead from here, the next two things to get right are budget and location.
Start with a realistic target of how much your completed development will be worth – talking with local real estate agents can help with this. You will need to then subtract costs to come up with profit! Costs will possibly include stamp duty, legal fees, surveyor services, council applications, developer charges, civil works and service connections such as gas, electricity and water.
I would also highly recommend you talk with your accountant and understand the tax implications of selling a subdivided property.
Subdivision can be profitable but can also put strain on finances if the process takes longer than expected and you are not getting any income from the development to offset the holding costs. Be sure to factor this in to your budget as well.
Location, location, location – I can’t stress enough how important location is in any property investment. The best way to find the right location – research, research, research! Make sure your project is in an area where people want to live, look for new infrastructure and council projects commencing.
Need some help with your next subdivision? Blue Wave Property Strategies can help, so call now!!