Should You Subdivide? Four Factors to Consider

(Feedsy Exclusive)

Whether you own a large piece of property that you’re considering subdividing or you want to buy an available piece of land, then resell it as subdivided lots, there are several different factors to consider.

How big is the lot in question?
In general, dividing one residential lot into two or three smaller ones is a project that most people can undertake with success. Buying a larger piece of land and subdividing it into many different lots goes past subdividing and into community development. This is especially true if you will need to create a road, because not all lots will have frontage. Make sure to consult a professional before undertaking a project like this.

What is the market like?
Before you subdivide property, it’s important to consider what’s selling in the area, and at what price. Are most buyers looking for small, affordable lots, or are they interested in bigger lots that will allow plenty of yard space around their home? This will determine how many lots can be created from your property and at what price. If you can’t make a reasonable profit, the venture may not be worthwhile.

What restrictions might be triggered?
Before you get too involved in a subdivision project on your property, it’s important to understand if there are regulations or restrictions on your land. Sometimes property is grandfathered under particular laws and subdividing can trigger different regulations, which can end up being expensive. Find out more by speaking to the Department of Environment, Land, Water, and Planning in your state or territory. Regulations can vary from one community to the next and they will best be able to advise you.

Understand tax implications
Under current Australian laws, subdividing your property into lots you own does not trigger a capital gain event; selling those lots, however, can. It may be a good idea to speak to a tax advisor who is familiar with real estate before starting this adventure.

In general, consider why you want to subdivide your property. The process can become quite a headache and may not be worthwhile for the average investor. Unless you are quite sure that you can turn a substantial profit by subdividing your land and either selling or leasing it in its new condition, you may be better off selling the entire piece of property to an experienced developer and saving yourself the headache.

0

Like This