Hi all,
I am thinking about doing my first subdivision and need to come up with a creative method to achieve this.Here are the variables. Currently we (me and my fiancee) owe 160k on our home, valued at 255k and owe 80k on a block of land worth 85k.
A second block in our area which has come on the market, which is about 2 kms from town center. This block is 1500sq m and asks 195k. We want to cut it into 3, which should then fetch low 80 k each. As we are inexperienced at this any ideas/help would be appreciated. My thought is long settlement so as to avoid any repayments before putting back on the market.Firstly you must find out whether the block can be subdivided or not, and if yes, get it in writing.
To cut it into 3 and sell for a gain of say $50k is a perfect world scenario. Your contigency plans if something goes wrong are at least as important as your plans for your initial intention. Get it right, you’ve gained $50k, get it wrong and you could lose your shirt.
I know this sounds alarmist, but better to be safe than sorry.Hope this helps…G7
Thanks g7,
Firstly i know they are able to be cut into 3, but i am concerned about the costs involved in doin this, and then what profit margin that will leave.
Secondly, i am not experienced in doing costings, this also concerns me, where can i learn how to do this properly?You could get onto a surveyor or conveyancer or something, I’m not too sure, to give you a preliminary guesstimate.
Also there are some very experienced people on this forum that do this kind of thing for a living, so I’m sure they’d be able to help with a heads up.
Scottybe
I am in Central Victoria and it will have cost me approx $17,000 and 10 months by the time the new titles are issued on my 2 block subdivision of PPOR.
So don’t be in a hurry!!
Steve
speak to a land surveyor, pending where it is u may have to submit 3 sets of drawings to council in order for the subdivision to take place.
Your council should have information on how much they will charge you to lodge a subdivision application etc.
Surveyors cost several thousand dollars for even a tiny plot, so three decent sized blocks will probably cost quite a bit.
Biggest cost is probably time – as you will be purchasing with the bank’s money and have no income coming back until you sell.
I don’t know anything about the vacant land market, so I can’t tell you whether it’s a good purchase or a bad one. One thing to consider is: if the property can easily be subdivided for profit, why didn’t the current owner do so? Are you sure the land will easily sell for the price you want?
We analysed a deal similar to this recently and found that the so-called profit of $60K on this particular project turned out to be untrue by the time we contacted council regarding length of time, interest payments, etc. We did a worse case scenario and best case scenario regarding all expenses and finally decided to leave it alone. Your cash/loan situation would be different to ours, but be thorough with your figures.
Good luck!
You need to talk to a surveyor and civil engineer in relation to how and what pitfalls are involved in subdividing.
Your surveyor should know what town planning issues you may have and advise on fees in relation the council and other authorities.
Your engineer should be able to give you preliminary costing in relation to services (sewer, water ect) check with your local electricity supplier as to the availability of power, the power may be close to your block but you may have huge costs involved in upgrading the transforers to supply enough power to your blocks. Phone too.
Lastly find a very good land solicitor to draft you offer, in your instance I would make the offer subject to development approval, finance est this will serve 3 purposes.
1 you wont have to settle on the block saving you interest.
2 if the council dont let you subdivide for whatever reason you dont have to settle on the block.
3 the most important you have time to sell the blocks, your solicitor can set it up so you can sell the blocks before you own them and with no title. you should be able to buy and sell under the margin scheme. to sell 1 or 2 blocks before you get land title maks for a safe development.
Do your figures right as it seems to me at 195K is to high a price for the land price. you should have a development profit of aroung 30% or look for the next deal. dont need to go broke on the first one. calculate the GST correctly
Good luckDennis
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