Perhaps you could consider bringing forward the development strategy to enable some additional cash flow or "wealth". This might work by developing one of the Melbourne properties to create a broader property holding. This way you could subdivide and sell land, you could develop sell part and rent part, or you could develop for profit alone.

There are financing tools readily available for this sort of funding as long as all the figures stack up. You need to build a compelling financial picture and delivery timeline and allow a bit of slack for the realisations so the financier doesn't have need to pressure you.

Good luck with it.

Tom, perhaps you could consider selling the first IP thus freeing up $120,000 or so? This should be enough to have the new building "substantially complete" and if timed well the proceeds from your PPOR (once you have moved into the substantially complete dwelling) will complete the construction. Then have a look at what you've got left and reload your investment portfolio.

Hi Maws,

Welcome to the forum.

There are a lot of considerations in answering what seems like a simple question!
Firstly, the requirements for subdivision vary from state to state and council to council.

Broadly speaking, if the covenant can be removed or otherwise overcome, there is nothing to stop you subdividing the land and selling a part of the land. It may be necessary to have plans approved and thus the property may have to be sold "with plans and permits" attached.

As to whether you subdivide and sell the land or demolish and build units depends on your own situation and preferences and of course the financially viability of the different options.

Good luck with the project.

Sounds like it's not too tough then. What you need to do is ascertain if the documentation is in order. Is there a current building permit, and if so what needs to be done to get a certificate of completion? Is there warranty insurance – you'll need this to be able to settle the property simply? From what you have said it seems that the documentation could be put into order fairly easily allowing for the property to be transferred. If you are serious about the deal you'll need to see your solicitor checks the docs thoroughly.

All this talk about subdividing has got me thinking back to the theme of the thread: "subdividing basics". I spend a lot of time talking to people about these basics, and some things keep coming up again and again. I've attempted to answer some of these below, in the hope that it might also benefit people who want to understand the basics. The answers are reasonably broad but can be considered applicable to Victorian planning law.

1. What is a subdivision? Subdivision can be broadly described as the creation of several land titles from the one parent title. This is usually when a larger allotment is broken into smaller allotments, or in the case of apartments when the land is divided both "in plan" (the bird's eye view), or "in strata" (the side, or sectional view).
2. Do I need a DA/TPP to sub-divide? Generally speaking, yes a TPP (town planning permit) from the local authority (council) is required to enable subdivision to proceed.
3. Do I need a DA/TPP to build townhouses? Again, the answer is generally yes. If there is only one proposed dwelling on a lot of more than 300m2 a TPP would not usually be required, however, if there are two or more dwellings proposed on any allotment, then a TPP will be required.
4. Must I subdivide when I build? Not necessarily, but it would be unusual not to, because the land cannot be sold in its parts if it has not been subdivided.
5. Must I build when I subdivide? No. One can subdivide with the intention of selling (or retaining) the subdivided land without building, but generally the Town Planning Department will need to understand what the intentions are for the land. This will often mean selling the land "with plans and permits" for someone else to develop. Even if one does not intent to build or to sell the land in the short term, the value of the land will generally increase when subdivided.
6. How much does a sub-division cost? I always have trouble with this one! It does depend on the size and complexity of the proposal. Around $25,000 is a sensible allowance for a very simple 2 lot subdivision. This does not take into account any development fees or levies as these vary from place to place.
7. How long does the process take? It takes a matter of months – allow 6 months to be comfortable – and in the case of a built development it is advisable to start this process as early as possible.
8. Who decides if my proposal is successful? Ultimately you need to satisfy the responsible authority (usually the local council) of the merits of your proposal. This is done formally by the lodging of a town planning application.
9. Who "does" the subdivision? The subdivision requires input from the designer/architect, engineers, land surveyors and planners. The developer (this is you if you are subdividing your own land) is the one that must direct these consultants, or engage someone to do so on their behalf.

All of this ignores what I believe is the fundamental factor. Subdivision is the process of making more than one title from one allotment, of having the effect of creating more land.  This is why people should be considering the merits of subdividing. Whether it is a broad acre subdivision of 100 house blocks, a simple two lot subdivision of an existing property, or the construction of an apartment above a shop, the principle remains the same. You are taking one property and dividing it onto several properties.

Given Mark Twain's assertion that we should "buy land, they aren't making it anymore", subdivision may be the next best thing.

Have a plan.
Have a budget.
Have a timeline.
Have a sense of your own capabilities.
Have fun!

Hi Tim,

There are plenty of these partially completed projects around (especially post GFC) and although they may seem compelling, there are a lot of complications. As well as the works to be completed there are also warranty issues, insurance, planning, and building control issues to attend to. The documentation can be expensive and time consuming, and as Richard alluded to, the bank will make their own judgements as to these risks.

Unfortunately what is needed is time to get the documentation and risk assessments in order. And time is usually what is most precious with these deals – the vendor wants a quick solution.

Perhaps have a look at this from an investment position. Generally speaking, these sort of problems can be solved by way of not affecting the current amenity (that is to say the dwelling already exists) as long as you have the cash to solve the problem. Let's say that it costs $20,000 to solve the problem – this represents a solid return especially in light of the discount to market you are likely to benefit from given the "spooked" buyers in the pool.

It may even be possible to segregate the titles if the issues of car parking and private open space can be addressed. Without knowing any particulars it's difficult to establish what is possible, but it seems worthy of further investigation. Even if the works can get a retrospective building approval, there should be nothing stopping you from leasing the space as accommodation, although I'm sure there are tenancy rights to negotiate.

With exceptions, the rule seems to be that country properties will provide a better rental yield, and city properties a better capital gain. That's not to say it all evens out. I'm sure you'll get plenty of feedback on this from forumites.

A five unit development can be potentially very time consuming and a strain financially. But I assume you already know that! I would suggest that you find someone that can help you with the process more than any single part of the process.

A well considered outcome will include an architect and builder (and perhaps a planner) and their opinions, but ultimately you, acting as developer, must ensure the continuity of the project. Get good advice at the start, make sure the buying and selling structures are right, that tax is properly considered, and that the research is sound.

The selling of "house and land packages" can also be handled in several different ways. You, as the developer and vendor, can enter into contracts to sell off the plan, or you could sell the land contingent upon the purchaser entering into a contract directly with the builder. Alternatively, you could build them and speculate. These, of course, are not the only options but they are issues that should be considered earlier rather than later.

I guess what I'm saying is that in my opinion getting the plan right, and structuring to accommodate those intentions, may be more important than the builder/architect question.

Good luck with the project.