Hi All, I have a number of properties that I am now looking at developing. I know I can possibly fit two or three units per site however I am not sure on whether I should keep the existing property and sub divide the land as a battleaxe block and build on this or to develop the site as a strata development. Is one method better than another? I know that I have the option of both on two of the properties. I have had a brief chat with some town planners and am getting mixed messages. Any thoughts or perhaps recommendations of who might help?
One consideration would be what can be financed over the block.
Many lenders do not like multiple properties on a single Title so that is going to be important.
If the property can be subdivided initially that would certainly help.
Whilst it is possible to get 3 dwellings on a single title with a couple of lenders care would be need to make sure you structur the loan correctly to avoid problems when it comes to the construction.
I have a deal on my desk from a forum member who went to a Broker for the initial house purchase and now he has come back to do the construction of the 3 dwellings the Bank has declined the deal. Always have to think "what if" down the track.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Agreed with Richard, sub division first then proceeding to do a valuation is important, many banks if the land is not subdivided will take the current land value and add the building figures on top, meaning a lower valuation.
For example, a 600 sqm block is worth $300,000, but sub divided would mean 2 blocks each being $200,000. If we are building a duplex of $200,000 each this would mean when sub divided each duplex would be $400,000 each. If they were not sub divided then the bank would take the single land value which would mean a $700,000 valuation.
This has hurt a lot of potential investors as they require equity to obtain more funds for construction.
I generally always advise clients to keep the existing dwelling on site and develop to the rear (obviously there are exceptions to this rule). Particularly in uncertain times in the market.
Im more than happy to have a look at the site and offer you some advice.
Regards
Thanks guys for the heads up. I don’t really have a major concern about the equity in the development as I have fair bit of equity available to fund any development or future investments. My main concern is deciding if I should pull down the existing property and develop the site with three new townhouses with common driveway etc or subdivide and keep the existing house with its own driveway and then build another house on a battleaxe block with its own driveway. I guess, is it better to have two properties on their own titles or three properties on a strata with shared driveway??? Martin
Hi Martin,
There’s a few good planners on this website such as Breece, his website is here: http://www.hubplan.com.au/
I guess the first question that would help out the forumers on here is what state are you in?
For the financial advice there’s quite a few brokers and finance experts on this website- have a look in that section and maybe shoot some pm’s around.
Also if you jump on your council’s website they should have all the information you need for planning and subdivision. Most councils in Metropolitan Melbourne do anyway from my experience.
Cheers,
It depends on the area. If you see a lot of battle axe developments then perhaps go with that approach.
tinusca wrote:Thanks guys for the heads up. I don't really have a major concern about the equity in the development as I have fair bit of equity available to fund any development or future investments. My main concern is deciding if I should pull down the existing property and develop the site with three new townhouses with common driveway etc or subdivide and keep the existing house with its own driveway and then build another house on a battleaxe block with its own driveway. I guess, is it better to have two properties on their own titles or three properties on a strata with shared driveway??? MartinThis depends on a couple of things but the first thing I would be looking at is what each property could sell for if you were to build 3 townhouses and what it will cost you and what your profit would be at the end.
Then I would look at what the existing house could sell for if you were to subdivide and what the subdivided lot could sell for.
Then I would look at what the existing house could sell for if you were to subdivide and also what the new lot would be worth if you were to build on it.
There your 3 options, which ever one shows the best profit and the least headache should be the best one to go with.
As for your other post of mixed messages from town planners, you will get this from almost everyone throughout the process of development, most of them are a rip off & will have there extra large santa sack out for you to full for them.
Keep researching and go with the one that gives you the best service etc
What location is the development in?Can anybody help me with my problem?
I have a land in Sydney 1200m2 and going to develop duplex at the front and single story house at the back. we have to do subdivision. 600m2 allocated to duplex rest for driveway+ single story. like mention above I have problem with bank to finance this project. currenly very old one single story house sitting on that land.
clearly subdivision must happen first otherwise Bank won't value those titles. How I can structure this project?
Note: Coucil nearly approved this DA.Shan,
Your problem is easily fixed since you only have 2 dwellings on one title. You just need a lender that will work with you.
I need to do two subdivisions to bulid duplex and single story house.
my intension to save money on subdivision and get lending from bank.
Subdivision will help to get better evaluation on titles.Yes Shan a subdivision will unlock value. But it takes time for the subdivision process to finish. Since you are looking to construct on the houses as well you might want to consider building first, then subdividing later. Subdividing first then building is not very efficient.
Perhaps I can give some feedback on the broader subdivision concepts.
- Land is usually more valuable in its parts than as a whole. In that regard, development approval (DA or TPP) is currency.
- If there is an existing dwelling that is in good condition, try to keep it. It may not always be possible, but it's cheaper than replacing it.
- Seek funding with a clear plan. This should be around what is there now, how you intend to develop, and what the exit positions are – for you and the potential financier.
- If you are considering the redevelopment or subdivision of more than one property, then put them in a line and establish a timeline with some overlap, to reduce exposure.
- Base you decisions on the feasibility of the project. What it will cost, the time it will take, the end values and the risk along the way.
- The margin as a percentage is at least as compelling as the profit projected. That is to say, it may be more prudent to invest $500,000 to make $100,000 (20%), than spending say $900,000 to make $150,000 (17%).
Much of this has been touched on in the responses above, but the critical issue that I generally come across when helping clients is the need to have a plan – to understand what you are doing – right from the start.
Good luck with your plan.
Great Thread guys, I am looking down a very similar path on a deal I’m looking into at the moment!
Very Helpful information.
Great advice and very helpful contents
A really good list there Christian of the concepts of subdivision. It is interesting to read about the same topic from different professionals as a planners view on it will be different to a surveyor, a builder, developer, financial advisor etc.
I also find subdivision interesting in that the number of options the client has and also who is the first point of call in the process. I keep discussing this with other professionals in the industry and there isn’t a clear cut answer- you can see a planner, a surveyor, an architect, building designer and so on. Each with their different approaches on subdividing.
In response to the topic there is a flow chart on subdivision I posted up here for metropolitan Melbourne. This applies to the typical residential development. Obviously there are some tweaks here and there for your individual council or state. https://www.propertyinvesting.com/forums/property-investing/value-adding/4343745
I think there needs to be a main sticky topic on the process as threads like this keep popping up here an there.
Cheers,
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