<font size=”2″>We have bought a property that can either be subdivided or can be developed as dual occupancy.
The original house is on the left side so the block can be split right down the middle.
On the right hand side a new house could be built.
What are the advantages of splitting a block compared to just re developing the block as dual occupancy. I assume dual occupancy is a lot cheaper to do?</font>
If you just split the block you can sell off the land and then use the money to pay off your mortgage or to reinvest. It probably won’t affect rent much. This is a great way to get a positive cash flow house, and to get your equity back out to re invest.
Dual occupancy is good if you can build a house for cheap and it can really increase your positive cash flow. But you need to be willing to go through the planning and development stage of the process. It can also work to increase your overall equity which you can draw out to reinvest.
If you have the money/borrowing capacity to create a dual occupancy, why not subdivide and build a house on the land portion? This might be a better way to add more value. The hardest thing is building the house, so why not subdivide anyway?
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just A Click AwayRyan McLean | On Property
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Email MeI am looking into this in Queensland at the moment. Talking with the council, the cost for an extra dwelling was 15-20k and the cost to do a full subdivision was only an extra 5k approx.
I thought it might be worth noting a couple of things, this applies to Victoria (each state has it's own rules). I'm not sure where you are:
- A subdivision or dual occupancy will require a planning permit
- Different councils have rules around if they will accept a subdivision only application or if they will require house plans too.
- Once you get a permit for a second (or third, or fourth etc) house the subdivision side of things can be done and is usually fairly straight forward.
Melanie Ellis
Change of Plan
http://www.achangeofplan.com.auryan mclean wrote:If you just split the block you can sell off the land and then use the money to pay off your mortgage or to reinvest. It probably won't affect rent much. This is a great way to get a positive cash flow house, and to get your equity back out to re invest. Dual occupancy is good if you can build a house for cheap and it can really increase your positive cash flow. But you need to be willing to go through the planning and development stage of the process. It can also work to increase your overall equity which you can draw out to reinvest. If you have the money/borrowing capacity to create a dual occupancy, why not subdivide and build a house on the land portion? This might be a better way to add more value. The hardest thing is building the house, so why not subdivide anyway? Ryan McLean http://CashFlowInvestor.com.au Positive Cash Flow Properties Are Just A Click AwayHi, My name is Julian. I'm new on this forum. Now to answer your question, Ryan.
What I'm about to do is 2 dual occupancy developments in Canberra on blocks right next to each other in a core zone. Understand, for my post, the costs relate to ACT dual occupancies.
I have looked into the new laws governing unit titling and subdivision. It appears that subdivision is a very expensive way to go, at least in Canberra. Not to mention the actpla experience. The betterment tax payable is currently 50% of the increased UCV from what I understand, and this is due to increase to 75% in June this year. This is crazy. So on each block if I subdivide I could pay at least $80k or more for each. There would also be ongoing fees payable. E.g: CGT, increased rates, land tax, etc.. Why subdivide? The only benefit I could see is if you wanted to sell one or both to take the added value. But true investors buy and hold. Think of the Monopoly game. You don't make money by buying & selling but buying and holding. I looked at all the possible negatives of subdivision/unit titling and they were heavy. It just makes no sense to subdivide here, especially if you intend to sell. In my case I will cop 150k+ in taxes and fees/ CGT on EACH block. So much for "affordable" housing the governments bragging about.
If I plonk a house in the backyard of each of these blocks which complies with subdivision requirements but I keep them on single titles and rent them both out, that is the best way. I'm saving a bucket load of costs and I'm still collecting full rental on the houses without additional ongoing costs like increased rates and land taxes and CGT isn't applicable if I hold. And in 10 years time I will be getting 1k a week on each of the 4 houses instead of 500 bucks with excellent capital growth.Thats just my feeling anyway.One advantage of a subdivision is the additional value extracted from the land (rather than the dwellings) simply by subdividing. In real terms, and especially in banking terms, the land is the appreciating asset and the building is the depreciating asset. This is also the case in accounting terms. If you have one allotment and make it into two or three then you have considerably improved the value of the land, to the extent that they would then be considered as separate securities.If there is a solid buy and hold strategy this may not be important, but if gearing is a part of the broader strategy then having separate and independent securities may be beneficial. This could also be considered as a part of a buy/develop/sell/hold strategy that uses some sales income to improve the LVRs on assets retained.
It’s an old thread to revive, but forgoing that, can you subdivide land and not build on it indefinitely?
It seems you need plans to subdivide often. Obviously that’ll increase cost but why not just subdivide and use the equity gained, why build at all? Is the money better because building and deprecation add bonuses?
Any ideas?
Hi walking to run,
I think you’ll find building and subdividing are two separate processes.
When I looked into that for a development they were separate. I did receive advice not to finalise subdivision until I had laid foundations for the buildings to ensure the boundaries were correct for the subdivision (coz people screw that up a lot … apparently) but there was no ‘legal’ need to do this.
The only thing I found that expired were the TPP’s.
This was in Victoria so it may be different in other states. Also, I am happy to be corrected as this was my understanding of the process and I am not an expert by any means.
Andrew
itsandrew
Go as far as you can see and you will see further.
It totally depends on the type of subdivision. The language varies a bit with location so the language I use is for my region. There is greenfield subdiv which is just cutting up blocks. This always results in a torrens title block. No house plans required. Then there is dual occ development. Within dual occ there is torrens and strata title, varied by council. Then there is multi unit dwellings, usually strata title.
With torrens title dual occ you usually need to do the approval and build before the second title is issued, or the 2nd property is “subdivided” the benefit is that with dual occ you can often get away with less land or slightly more lenient criteria than greenfield subdividing.
As stated above, if you can subdiv and cut off a block and sell it then your house becomes more +cf due to smaller mortgage.
The advantage of going through the hassle of building (if doing dual occ) is that you have a new dwelling. The tax advantages and comparative rent can be much better so sometimes the numbers work better to buy the old house, renovated it, dual occ the back, build new, keep new and sell the old (no gst on old dwelling but there would be on new). Keep new for better rent, better tenant, better tax.Thats a few options anyway.
BuyersAgent | Precium
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I’ll give my two cents.
First point to note is that a subdivision will give you capital to work with in the future where a dual occupancy typically will not.
Secondly, as stated above, the selling of the new lot will often give you a higher yield when you use the profits to pay down the mortgage.
Finally, the additional equity you have after doing a subdivision will allow you to get into the next cash flow positive deal so that you can get even better returns and you’re left unable to move after using all of your equity in the first deal.
Toby Richardson | Property Wizards
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Thanks everyone, what i didnt know was selling the old house had no cgt, why was that?
You need to live there for a few months to be CGT free.
Dial occ or subdivision? If you dual occ but cant subdivide then all you get is two rental incomes. If you subdivide then you liquidate an asset to lower your mortgage. In victoria dual occ subdivision is allowed in the new residential zones- but some councils are pushing for minimum lot sizes and a few had them gazetted eg Geelong for the NRZ. Keep an eye on that.#Planning Permit | AuArchitecture
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