There's no doubt about the lucrative nature of the property market. Returns from property investments seldom disappoint and land sub-division is increasingly being used as an avenue for increasing these returns.
It sounds simple enough that you can buy a parcel of land, subdivide it into two or three lots and sell each lot individually. While not entirely impossible, here are the pre-requisites for a profitable sub-division.
Sub-division of land is prohibited in certain areas. This prohibition is often tied to zoning regulations formulated to ensure that the development of property in the affected zone(s) is sustainable. The easiest way to determine whether sub-division is allowed in a particular locality is to check for the presence of other sub-divided properties within the neighbourhood.
In areas where sub-division is permitted, the local council will have to approve your property development plan(s).
Apart from the requisite application fees, approval from the local council may also attract a number of indirect costs. For example, a hydrological engineer's report is often mandatory for approval to sub-divide land in an area where flash floods are common.
Similarly, a local council could approve an application for sub-division on condition that the property developer agrees to pay requisite contribution fees. Contribution fees cover the cost of infrastructural changes (e.g. water and sewerage connections) necessitated by the increase in number of lots from the sub-division exercise.
In certain cases, the local council might require that your immediate neighbours give their consent for the sub-division before approval is granted.
The Right-Sized Lot
Once a locality that allows for sub-division is identified, you'll need to find a parcel of land that's large enough to be sub-divided into two or more smaller lots. Local councils dictate minimum lot sizes for their areas of jurisdiction and your plans to sub-divide must comply with the law.
In Brisbane, for example, the minimum lot size is determined by the zone category in which your property falls. In Sydney, for example, the minimum lot size for a detached house in close proximity to a transport/town centre is 250 square metres. Parcels of land that are less than 500 square metres (at the very least) cannot be subdivided if the plan is to build detached houses on the sub-divided lots.
The more popular the suburb, the higher the likelihood that potential buyers will be willing to pay more for a sub-divided parcel of land. If you intend to sub-divide for profit, avoid less popular suburbs that may not give a good return on investment.
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