It gives you the opportunity to construct a dwelling on newly created lot, which you may be able sell or rent out for extra income. Or you may be able to sell the land without a dwelling on it.
If you are considering subdivision, there’s a number of things you need to know before you get started.
Firstly, it’s important to have a clear idea of what you’re hoping to achieve.
You’ll also need to determine whether the land you are subdividing is in a desirable area. Decide early on if your intention is to build a dwelling on your new block to sell, or to attract tenants.
Consider that potential buyers may be seeking a home on a larger piece of land, whereas people looking to rent may not be as particular about the size of the backyard.
Types of property
There are a variety of dwelling options when subdividing a property.
While the most popular would be the build of a new home, in some states you may also be able to build a granny flat. This can be beneficial in that you may need less land in order to accommodate both the original residence and the granny flat - however the regulations around these dwellings differ from state to state, so you’ll need to do your research.
If you’re looking to buy land to subdivide, check with local council first to find out what regulations apply - making sure the land can be subdivided and that it's zoned for the type of structure you have in mind before you go ahead.
The local council sets planning and zoning regulations that will determine whether or not you can subdivide your land. You will need to seek permission from the council before proceeding with your subdivision plans. The council may need to survey the land to determine whether or not it is eligible for subdivision.
Furthermore, not all lots are made equal. Some councils will stipulate a minimum lot size for a property so consider this when choosing the land you buy. You will need to consider the final size of each new lot of land after the division.
Some lots will be easier to subdivide than others. For example, a level lot of land is ideal as it will require less groundworks and a corner block is another great option for subdividing.
To find out which regulations apply, visit your local council’s website.
Financing the loan
If you already have a mortgage, consider whether you may need to refinance in order to fund the costs associated with subdivision. You may have to finance the demolition of any existing homes on the land as well as the construction of new dwellings.
When working out the financial aspect, you’ll also need to factor in other costs including:
- drainage and sewerage
- installing driveways
- landscaping and retaining walls
- engineering fees
- planning fees
- taxes, council rates and fees
Seek professional help
Subdividing land can be a complex and costly financial decision so you should seek help along the way. Do as much research as you can to begin with and make sure you seek professional help. Get advice from your local council, town planners, and licenced builders.
You should also speak to your local Mortgage Choice broker who can give you a realistic breakdown of the costs involved, create a clear development plan, provide relevant market information, and help you sort out finance for your subdividing project.