Should you buy and subdivide?

Subdivision can be a clever way to make the most of a larger block of land. But how does it work? Here’s what you need to know about maximising the value of your property.

Owning property is a key way to grow your wealth in Australia. As a property investor or owner, if you want to maximise capital gains or turn a larger block into a source of income, it makes sense to explore your options to subdivide. 

Find out more about this strategy and how this can help you fast-track your journey to build wealth through property. 

What is subdividing?

Subdividing is when you take a block of land, often with a single structure on it, then ‘split’ it to create two or more separate residences and addresses. This can be done by building on available space or knocking the original premises down to create new housing.

Subdivision can also include building a small residence like a granny flat that can be connected to power, water and other amenities, and given its own separate address.

A subdivided property often has addresses such as 19 and 19A, which reflects the addition of a new home on an existing block. The practice is popular in older suburbs of Australia where the half or quarter-acre block was standard for property owners. As lifestyles change and the population grows, reducing the size of these properties to create new homes delivers a win on many levels. 

Why subdivide?

Turning one property into two is an opportunity to sell for more. For example, you may buy one home on a block, upgrade it and make $80-100k as profit. By subdividing, you will have two brand new homes to sell and the potential for capital gains is greater. You even have the option for land subdivision, where you buy land, subdivide it, then sell the individual lots before any construction even takes place.

In other cases, property owners who have a large block subdivide and sell a portion of it. This creates an opportunity to realise capital while remaining in the home they love.

The final reason to subdivide is to accommodate an extended family. Adult children may offer to purchase part of their parents’ land in order to build their own home. 

How do you go about subdividing your property?

Subdividing a property will pay off in the long run, but it does take some planning. There are three major steps to subdividing your property:

1. Work out whether your plot can be subdivided:  The size of the plot is of course a major factor; you can’t subdivide if there is only room for one small home in the first place. Beyond this, different councils will have different requirements, so you need to ensure that your property fits the minimum size for a subdivision in your local area and that you will be able to get approval for the project. A local builder or development company should be able to help by conducting a feasibility study for you.
2. Get the right advice: Subdividing a block is a large undertaking, especially if you are demolishing a home and starting fresh. Talk to builders, architects, and real estate experts who specialise in this type of project to figure out the best and most cost-effective way to divide your property. You may also want to contact a surveyor or a town planner for further advice as you will have to take into account things like access to the property and utility connections.
3. Apply for permission: Before you start to build, you will need formal approval from your local council. It needs to see the designs and check that they adhere to local requirements. 

Subdivide to reduce housing shortages

When you buy to subdivide, you’re not only setting yourself up to profit, you’re adding much-needed new homes to the local area. Before you make decisions, make sure you speak with a local real estate agent about the type of homes that will appeal to the buyers or tenants you will be looking for.

Looking for a property you can subdivide? Reach out to us today.