Buying property is a popular investment option for anyone looking to start their investment portfolio or expand on a current investment strategy in Perth.
However, with dwindling pieces of land on offer, it can be harder than ever before for investors to actually break into the property landscape or even expand their current portfolio.
By looking at different strategies, such as subdivision and narrow lot home designs, investors can immediately expand their opportunities and perhaps most importantly, their ability to generate profit and secure their future.
Understanding Subdivision For Property Investment Purposes
Subdivisions are exactly what they sound like: dividing up piece of land up into multiple titles. Once the land is broken down into individual segments, the investor can develop a property on each piece of land and sell each independently at a higher price than if there was only one property built on the land.
When it comes to subdivision, it’s important to research minimum lot sizes before embarking on any works, as these regulations will dictate how many times you can subdivide your property.
As these requirements often vary depending on the location and zoning of the property, it’s important that you visit your local council’s website or contact their planning department to obtain information specific to your property.
Professionals such as licensed surveyors or town planners may also be able to provide expert advice on the subdivision potential of your land.
Types of Subdivision
Subdivision offers a wealth of opportunities for investors. There are several types of subdivision, each with its own advantages and potential for profitability. The three main types of subdivision are Torrens, Strata, and Community Title. Let’s explore these options and how they can benefit property investors.
1. Torrens subdivisions
Torrens subdivisions involve creating separate titles for individual properties, such as standalone houses, with no shared areas. This type of subdivision is perfect for investors looking to create multiple independent dwellings on a single block of land.
This is often the ideal approach for investors considering a knock-down and rebuild project.
Knock down rebuild projects involves demolishing an existing house on a block, often one that is old and in need of significant renovations, subdividing the land, and building two or more properties in it’s stead.
As this type of project involves building on land you already own, there is no additional stamp duty to pay. Investors can also choose to sell one of the subdivided blocks to finance building their dream home on the remaining block.
2. Strata subdivisions
Strata subdivision involves dividing a property into separate lots with their own individual titles but with shared common areas, such as driveways and green spaces.
Strata subdivision can be especially attractive in high-density urban areas where demand for apartments and townhouses is strong. By creating multiple individually-titled properties, you can appeal to a broader range of buyers and investors.
3. Community title subdivision
Community Title subdivision combines elements of Torrens and Strata subdivision, offering a mix of shared facilities and individual lots. It allows investors to develop a mix of property types, such as standalone houses and townhouses, within a single development. This can help to diversify your investment and cater to a wider range of potential buyers and renters.
Profitable Strategies for Subdividing Land For Perth Property Investors
Subdividing land can be an excellent investment strategy for Perth property investors, as it offers multiple ways to generate profit.
By dividing a single parcel of land into smaller lots, investors can take advantage of several opportunities:
1. Develop and Sell
Investors can develop the subdivided land by building narrow lot homes on each parcel and selling them for a profit. This strategy allows investors to capitalise on the growing demand for low-maintenance properties and is ideal if you’re after a quick turnaround.
2. Develop and Rent
This option is similar to option 1, but instead of selling, investors may choose to instead rent one or more of the properties built on the subdivided land, creating a steady stream of passive income. This approach can provide long-term financial benefits and help diversify an investor’s portfolio.
3. Sell to Reduce Debt
Investors may also choose to sell one or more of the subdivided properties to reduce the debt on the remaining lot(s). This strategy can help investors manage their financial obligations while still maintaining a profitable investment portfolio.
4. Hold and Wait
Of course, it is also an option to keep the subdivided lots vacant and wait for land values to appreciate.
This approach can be beneficial for investors who don’t have the budget to invest in development immediately. As demand for land increases, the value of the vacant lots will likely rise, providing the investor with a profitable return on their investment. However, there are also some drawbacks to this strategy. Investors won’t be able to generate passive income from the vacant land and may have to pay off the mortgage out of pocket. Additionally, they will still be responsible for property taxes, council rates, and maintenance costs associated with the land.
Benefits of Subdivision as an Investment Strategy
The main advantage of subdivision is that it allows investors to increase the value of their land holdings. By transforming a single parcel of land into multiple smaller lots, investors can potentially generate more profit than if they had developed a single property on the original land.
While cutting down the sizes of blocks may seem counterintuitive, smaller blocks are rising in popularity. This is largely due to the fact that potential buyers are increasingly favouring low maintenance narrow lot homes.
The variety of options when it comes to subdivision makes this strategy an attractive proposition for seasoned investors looking for multiple property investments. It’s also attractive to green investors looking to build an investment property that can be rented out.
Getting Started
Like any investment strategy, subdivision requires research. This is largely because not every subdivision stands to earn a profit. Much like traditional homes, investors must look into elements of location and of course, the supply and demand ratio.
From there, as subdivision is highly regulated, investors should look to engaging a buyer agent. This is because a real estate professional will be able to provide information pertaining to minimum lot sizes, building restrictions and zoning requirements.
While the buyer’s agent is looking into elements of feasibility, investors employing a subdivision strategy should engage with home builders. Plunkett Homes will be able to provide advice and options for building narrow lot homes efficiently and effectively.
With the Perth property market continuing to grow and a marked lack of property supply, finding lots that can be subdivided is now more important than ever. Especially if you are an investor looking to diversify or create an investment portfolio.
By taking advantage of subdivision rules, investors can essentially maximise land in order to ensure that whatever subdivision strategy they use is profitable in the long run. To help your subdivision plans come to life, contact Plunkett Homes today to talk through the different options.
