Subdividing is a strategy I have used successfully and it can provide great flexibility for your portfolio. The process involves council consent and a surveyor. Generally services need to be added and this can involve both the electrical and plumbing trades, plus liaison with your local power company.

As an investor you need to be aware that it can be expensive and slow to subdivide a property, so any article on the topic must remind you to make sure the outcome is worth the effort. In saying that, unlike many other forms of property development, subdivision can usually be carried out while tenants live

in the property, making it easier to cover holding costs.

Evaluate Your Site

The first place to check when considering a project is the current (or proposed) zoning rules. You want to see if the section size you are intending to create fits into the council’s housing density rules.

Next, your surveyor can generally provide a ‘”desktop” evaluation and flag any issues or concerns that are apparent from the council records - in particular around the estimated ease and cost to connect to council services and roading.

The first property that my partner and I subdivided was a house on two crosslease sections. The land was flat and an even rectangular shape, and access and services could easily be provided to the second section.

This meant that we were able to rent the home and obtain a holding income while we were working through the subdivision process. The activity required on site was not disruptive to our tenants, aside from a couple of days spent measuring for the required services at the roadside.

As owners of both cross-lease sections, we were also able to grant easements from one of the new titles to the other in order to have some services (sewerage in this case) delivered, by connecting into the existing house services.

Where there are existing buildings, housing density rules can often be bypassed by the council as there is nothing to be gained by council in restricting this activity (and they can levy higher property rates). Where dwellings exist and are joined together, rules around fire rating apply, as a fire-rated wall will be required from ground to the roof along any shared walls.

Our most recent project involved a house and two adjoined flats on one title. We purchased with the intention to subdivide the house onto one title and the two flats onto a second, however after we investigated further we were able to create three titles with a dwelling on each, even though two of these titles were smaller than the zoning rules allowed.

The time to complete your project will be dependent on how busy your surveyor and the council are at the time you need their services. I use a surveyor to complete the application, although there is nothing to stop you completing that yourself.

Once you apply there may be some back-and-forth with the council, after which consent is hopefully granted with conditions, which will provide definitive information about the fire-rating (if required), access and services required.

Big Profit

Then the costs start to roll in. You will have paid an application fee and also your surveyor to date, now get ready for provision of water meters, electricity connections and vehicle access. These can be expensive and slow, so have an understanding of your council’s approved suppliers so you can shop around a bit.

Our two most recent projects have taken six and 12 months respectively and each case has resulted in a significant equity gain (25% and 28%, providing total additional equity after costs of $315,000). The properties were rented throughout the process and while we have funded the subdivision (at around $50,000 each time) the incoming rent has provided a healthy yield throughout. We are now able to hold or sell five properties as it suits our strategy, rather than just the two properties we originally purchased. All that without touching a paint brush.

I firmly believe that subdividing is a great way to increase your wealth. Hopefully this brief article gives you some idea of what is involved. As a buyer’s agent, finding these types of deals is what makes me tick so get in touch if you would like to do a project like this and would like guidance in your property search.