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A Guide to Subdividing Investment Properties for Profit - featured image
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A Guide to Subdividing Investment Properties for Profit

key takeaways

Key takeaways

Australia's property downturn is now over, and while prices are slowly rising, we aren't going to experience a property boom with soaring prices any time soon. One way to increase profits quickly is by subdivision of property.

Subdividing investment properties can be a great way to increase your return on investment, but it can also be a risky process if you don't know what you're doing.

Subdivision of a property is where a piece of land is divided into several sections which can be separately sold or developed upon. Torrens Title is the most common type of land subdivision in Australia.

Before embarking on property subdivision, ask yourself if your property can be subdivided. It must meet certain criteria and adhere to the rules and regulations set by the local council, state or territory government, and planning authorities.

Subdividing a property is a complex process that involves several steps. Research local zoning regulations, minimum lot sizes, and other requirements, and consult with professionals to obtain preliminary advice.

If you decide to embark on property subdivision as an investment strategy, make sure you're well-researched, have a great team around you, and buy the right property in the right location.

Australia's property downturn is now over, and while prices are slowly rising we’re not going to experience a property boom with soaring prices any time soon, which means there are more property investors than ever looking at ways to actively increase the value of their property portfolio.

Any wise investor knows that sitting on your hands isn’t a good way to boost your equity, and there is more to increasing profits than simply renovating your bathroom.

And there is one property investment move that is becoming increasingly popular for those looking to increase profits quickly - a subdivision of property.

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Note: While subdivision of property might be a great way to increase your return on investment, how (and how much) money you make from subdividing an investment property depends, mostly, on how you decide to do it and what process you undertake.

The problem is, while the rewards can be plentiful, it can also be a risky process if you don’t know what you’re doing.

Here’s my full guide to subdividing investment properties for profit.

What is a subdivision of a property?

Subdivision of property or land is, put simply, where a piece of land or property is divided into several sections which can be separately sold or developed upon.

There are a few different types of subdivisions though depending on how you’re planning to divide the property.

Some common types of land subdivisions in Australia include:

Torrens Title

This is the most common type of land subdivision in Australia.

Each lot in a Torrens Title subdivision has its own unique title, and the owner has full ownership of the land and any structures on it.

This type of subdivision is used for both residential and commercial properties.

Strata Title

Strata Title subdivisions are commonly used for multi-level apartment buildings and townhouses.

In this type of subdivision, each unit or apartment has its own title, and the owners share common areas such as gardens, driveways, and building exteriors.

A body corporate or owners' corporation is usually responsible for managing and maintaining the common areas.

Dual Property

Dual Occupancy

This type of subdivision occurs when two separate dwellings are built on a single block of land, either as detached or semi-detached units.

Each dwelling typically has its own title, allowing the units to be sold separately.

Battle axe subdivision

This is a type of land subdivision where a property is situated behind another property and is accessed via a narrow strip of land, similar to the shape of a battle-axe.

This type of subdivision is often employed to make efficient use of land and maximize the number of lots on a given piece of property.

It is particularly useful when the land available for subdivision has an irregular shape or when a large property is divided into smaller lots.

Rural subdivisions

Rural subdivisions divide large parcels of land into smaller lots for various purposes, such as farming, grazing, or rural residential living.

These subdivisions often have specific requirements and regulations to ensure the sustainable use of land and protect natural resources.

Which property can be subdivided?

Before embarking on property subdivision, the first question to ask yourself is… can my property even be subdivided?

In general, a property can be subdivided if it meets certain criteria and adheres to the rules and regulations set by the local council, state or territory government, and planning authorities.

While these requirements may vary between jurisdictions, some general conditions that make a property suitable for subdivision include:

  1. Land size: The property must be large enough to be subdivided into smaller lots while still meeting the minimum lot size requirements specified by the local planning authority. This often depends on the zoning and land use regulations in the area.
  1. Zoning: The property's zoning designation dictates its allowable uses and the possibility of subdivision. Zoning regulations vary between regions, so it's essential to check with the local council or planning authority to determine if the property's zoning allows for subdivision.
  1. Access: Subdivided properties must have appropriate access to public roads, infrastructure, and utilities. This might involve creating new roads, driveways, or easements to ensure each new lot has suitable access.
  1. Shape and topography: The shape and topography of the land can impact the feasibility of a subdivision. Ideally, the property should be relatively flat and have regular dimensions, making it easier to subdivide and develop. Irregularly shaped or steeply sloped properties may require creative solutions or additional engineering work.
  1. Utilities and services: The availability of utilities such as water, sewerage, electricity, and telecommunications is crucial for subdividing a property. New lots must be connected to these essential services, which may require upgrading or extending the existing infrastructure.
  2. Environmental factors: The presence of environmentally sensitive areas, heritage sites, or protected vegetation can affect a property's subdivision potential. These factors may require additional approvals, studies, or restrictions on development.

How to earn money subdividing land as an investor

Once a property or land has been subdivided there are a few ways that investors can earn money from the subdivision.

Here are your options for making money by subdividing land:

  • You can sell off the vacant land.
  • You can build a property on the vacant land and then sell it.
  • You can build a property on the vacant land and then rent it out for a passive income.
  • You can build a property on the vacant land, move into it then sell or rent out the existing property on the other piece of land.
  • You can hold the vacant land.

How you subdivide your property, the time it takes and the cost involved go some way to determining how much money you’ll make as an investor.

Steps of the subdividing process

So, you’ve determined that you can subdivide your property and you know how you plan to make money off it.

The next questions are: How do I subdivide a property? And how long does subdivision take? 

The fact is, subdividing a property is a complex process that involves several steps.

Steps

While the specific requirements and procedures may vary depending on the local council, state or territory, and the nature of the property, the general steps involved in subdividing a property are as follows:

  1. Research and planning: Start by researching local zoning regulations, minimum lot sizes, and other requirements set by your local council and planning authority. Assess the feasibility of subdividing your property based on these factors and consult with professionals like surveyors, engineers, and town planners to obtain preliminary advice.
  1. Site analysis: Evaluate the property's site conditions, including topography, soil type, vegetation, access, and available utilities. Identify any constraints, such as easements, heritage sites, or environmental factors that could impact the subdivision process.
  1. Engage professionals: Assemble a team of professionals to help prepare the necessary documentation and guide you through the subdivision process. This may include surveyors, engineers, town planners, architects, and legal advisors.
  2. Concept design: Develop a concept plan for the subdivision that considers lot sizes, layout, access, and utility connections. This plan should be in line with local planning regulations and take into account any site constraints identified during the site analysis.
  1. Pre-application meeting: Arrange a pre-application meeting with your local council or planning authority to discuss the proposed subdivision and obtain feedback on the concept design. This meeting can help identify any potential issues and clarify the requirements for the formal development application.
  1. Development application: Prepare and submit a development application to your local council or planning authority. This application typically includes detailed plans, engineering reports, environmental assessments, and other supporting documentation. Be prepared to pay any required application fees.
  1. Review and approval: The local council or planning authority will review your development application and may request additional information or changes to the proposal. They may also notify neighbours and invite public comments. Once all requirements are met, the council or planning authority will issue a development approval or planning permit, which may include specific conditions that must be met during the subdivision process.
  1. Detailed design and documentation: Develop detailed engineering designs, utility connection plans, and other required documentation based on the approved development application. This stage may also involve obtaining additional permits, such as construction or environmental permits, depending on the local requirements.
  1. Construction: Carry out any necessary construction work, such as building new roads, installing utilities, or grading the land, in accordance with the approved plans and permits.
  1. Final survey and plan registration: Engage a licensed surveyor to prepare a final plan of subdivision, which shows the boundaries and dimensions of the new lots. Submit this plan to the relevant land registry office or title office for registration and approval.
  1. Obtain new titles: Once the final plan of subdivision is registered and approved, apply for new titles for the subdivided lots. The land registry office or titles office will issue separate titles for each new lot, enabling you to sell or develop them as desired.

Keep in mind that the timeline for subdividing a property can vary significantly depending on the complexity of the project, the local council's requirements, and other factors.

Subdividing the property, including surveying the land, making applications, and getting approved and submitting certifications and registrations may take a long time to complete so it’s suggested that you allocate 12-18 months for the whole process.

If you’re looking to then build a property on that land, then the timeline would be even longer.

Costs

Cost of subdividing

The cost of subdividing a property varies depending on your location, the cost of your surveying, legal fees, application fees, building works, and the complexity of the work which needs to be done.

Generally, simple subdivisions of a piece of land to be split into two either side by side or front and back would be at a relatively low cost whereas more complex subdivisions would, of course, cost more.

The costs also differ by state.

Subdivision is most expensive in Queensland where investors should expect to fork out anything from $60-000-$90,000.

Subdivision costs in Western Australia are also steep ranging between $50,000-$90,000.

Investors in New South Wales should allocate a budget of around $50,000 for their subdivision.

Subdivision costs in Victoria are a little less, from $30,000-$50,000.

And subdivision costs in South Australia are the cheapest, starting at just $20,000-$25,000.

The cost of removing trees, levelling ground, and designer, surveyor, or conveyancer fees are in addition to these fees.

The pros and cons of subdividing investment property

Pros

  • Subdividing an investment property can increase the value of your property, therefore increasing your equity
  • It can lead to higher profits
  • Subdividing to build and rent another property can help to create a passive income
  • Smaller blocks can be easier to sell off to potential buyers
  • It gives you investment options - of building, selling, renting or even holding the subdivided property

Cons

  • The new blocks are smaller after subdivision which could reduce their value to buyers
  • Subdivision takes time
  • Subdivision is expensive and there can be hidden additional costs involved
  • The market and demand could change which may affect your planned profit

Tax

The tax implications of subdividing land

Subdividing property is a great way to boost your profits, but if you buy and subdivide land with the intention of making a profit, the ATO will consider this a commercial activity, and any sale profit is generally treated as a trading profit on which you need to pay tax, and does not get the benefit of the 50% capital gains tax exemption.

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Tips: If you decide to embark on property subdivision as an investment strategy, you need to make sure you’re well-researched and aware of the rules and restrictions in your area before you begin as well as gathering a team of professionals around you.

As with anything, the best place to start is by doing thorough research and due diligence, getting a great team around you, and, of course, buying the right property in the right location.

By the way… at Metropole our development project management services help our clients become what we call “armchair developers” – we take care of the whole project including subdivision, from concept to completion.

If you want to find out more, please click here now and book an obligation-free initial chat to discuss your options.

About Bryce is a property development specialist, having successfully sourced, project managed and completed hundreds of development projects for Metropole’s clients, helping them create substantial wealth.
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