Hi,
Just wondering if anyone has had experience subdividing in NZ ?
1. What are the traps ?
2. What are the main costs (for simple 1 title subdiv) ?
3. How long does it take ?
4. What specialists/consultants did you need ?
5. What was the result (your experience) ?
6. Did you buy with the intention of subdividing, and if so what due diligence did you do on the subdiv component ?It probably varies a little from town to town, just looking for peoples experience.
Appreciate the help
Redfish[cap]
Be encouraged to run the race
Good question Redfish.
I too have been asking the same questions on the dedicated NZ forum http://www.nzpropertytogo.com/, but as yet nobody has responded.
The only knowledge I have gained so far from my research is that NZ subdivision processes and laws are very similar to Oz.
Cheers
GeoffBWe’re in the middle of subdividing a residential property off a commercial property and the main thing I can tell you is that it is a SLOOOOOOW process.
Estimated time start to finish is 6 months, of which five months are spent with papers being shuffled around bureaucrat’s desks!
My understanding is that first you need a cadastral surveyor to take a look at the site and confirm that it can be subdivided, where the right of way will be, and where the existing sewer and water runs. Then the surveyor, at your cost of course, submits papers and a fee to council for Resource Consent. Once council gives consent the actual subdivision can happen. This is where you start throwing money at the job! The surveyor formalizes where the property is subdivided and submits drawings (and money!) to LINZ (I can’t remember what that stands for) and then your lawyer gets involved (more money!!) creating the new title documents. All up, we’re looking at something around $5-6ooo.
Six months later, voila, you now have two smaller properties where you once had one big one!!
In response to your “did we buy with the intention of subdviding” question … we always try to buy with the ability to add value!
When we purchased the properties, the house had a “gentleman’s agreement” to access it, so we knew we’d put a formal ROW in place as soon as we owned it, thus adding value immediately. In order to formalize the ROW, it made sense to chop it into two titles because the property can then be better leveraged by having it on two titles, i.e. we can sell off the house and keep the commercial, or re-finance the residential at 80% instead of the 60% it’s at being bundled with the commercial property. Having the house on a separate title magically makes it worth considerably more than bundled with the shops!
Personally, we’re not seeing any “traps”, you either can or can’t subdivide, it’s a pretty clear cut “yes” or “no” answer from what we can gather.
Good Luck!
PCSuccessful investors make their money when they buy
Thanks playa chicken,
Did the $5-6k include all council fees, contributions as well and survey costs and civil works ?
Are you classed as a developer ? .. do you have an issue with tainting future investments ?
Anybody else tried subdividing ?
Redfish[cap]
Be encouraged to run the race
Hi there,
thanks for the insights. With regards to the financing – what did you have to do with the bank re running the subdivision past them ?
whats involved from that side ?
thanks
andrew.Redfish — we’re only two months into the project, but yes, the $5-6K estimate is all up including council, surveyor, lawyer. In this one-off case our accountant advised that we won’t be classed as a developer, so no tainting.
Aptam – to date we’ve done nothing with the bank. Didn’t have to run anything by them first. After the properties are subdivided and on two titles, we will have valuations done on both so we can either sell one or both, or refinance. The property is currently 60% financed by the bank because it’s commercial. Once separated the commercial will remain on 60%, but the residential portion can be leveraged to 80%.
Cheers,
PCSuccessful investors make their money when they buy
Hi Playa,
I suppose what I am getting at here is more from the point of view of what happens to the two separate titles. Ie, when you subdivide, since the bank is registered as holding a mortgage over the original section, do they automatically come up on the titles for both of the properties?
You would think that they would otherwise the bank wouldn’t be too happy [cap]
cheers,
andrewHi Redfish,
We are currently setting up to purchase property in NZ. Specialists needed are a NZ solicitor & accountant as well as opening a NZ bank account, lending criteria will be different if you don’t reside in the country. It’s important that you get good advice on what structure you use as you could be taxed by both the NZ and Australian tax systems. The exchange rate fluctuations is a significant investment risk. Don’t assume that both currencies will always be as aligned as they are now. Cheers Romo & CiscoDear Redfish
Make sure you are aware of the council regulations in relation to the minimum dimensions for subdivision. Go to the relevant council and ask the planner if what you want to do is feasible. Depending on where you are, there are a lot of council charges for each approval. In the northlands district you are looking at about NZD $12,000 in approvals.
You must make sure that the land is connected to the sewrage, a council planner can confirm this for you. Good luck[biggrin]
Aptam,
Yes, my understanding is that the bank will appear on both of the new titles created — our lawyer will see to that!
PC
Successful investors make their money when they buy
I am past the council approval stage. Now have a whole heap of conditions to satisfy, completing survey and engineering works. 2 big problems, 1 – the cost. Don’t know how you got it done for $6k! Council contributions are about that, then there is the survey fees ($5k+) and engineering works for things like driveways, stormwater, sewer laterals, telephone and electricity. That could add up to $30K if I go for a concrete driveway. Problem 2 is that contractors are booked out 6-9 months out, and given the shortage of supply your not really in a position to negotiate price!
Still, problems when solved equal profits right ?!
Redfish
Be encouraged to run the race
Redfish, it’s so cheap for us because we’re subdividing in a small town (Woodville) of only about 2,000 population in Tararua township. The surveyors were in today to the tune of $2,500 for survey and drawings. We had to wait about two weeks from giving the surveyor the go ahead after receiving the Resource Consent.
Obviously not all towns are equal!!
PC
Successful investors make their money when they buy
Hi everyone
I know I’m coming in at the end of a long conversation here but subdivision in NZ is very different – best option is to cross lease residential blocks with multiple dwellings on them. Commercial is a different proposition.
Rates and contributions vary depending on the city and the council fees involved, and will definitely be more in Auckland than in smaller towns.
There are a lot of traps with this so if you find a good NZ based lawyer experienced in this work he/she will become your best friend!
Having subdivided blocks several times in Oz and having bought blocks in NZ specifically for the same purpose we’re going down this track soon, so if we have any more information we’ll post it.
Regards
Sigridhttp://www.kiwiproperty.biz
NZ Resources for Australian Investors
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