Smart Property Investment Article: Splitting Profits

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Smart Propert Investment: Splitting Profits: Stepping into the Development scene.

"Splitting Profits; Stepping into the Development Scene" (May 2012)

With big profits to be made, it's no wonder renovators often consider stepping into the development space. But going from a small renovation project to building a block of units can be a daunting task. In this first of a two-part series, Jennifer Duke looks at the 'splitting' technique and discovers why this is a perfect first step towards huge returns.

... Director of Stonnington Conveyancing and Melbourne Buyer's Advocates Paul Garson also believes that using experts from the field is one way in which investors can learn the ropes of developing. "You don't want to buy the wrong property and have to re-sell it because it's not profitable, so if it's an auction you have to do all that research really quickly." Mr Garson says. "Sometimes it's best to consider a buyer's agent with experience in finding these properties".

Once an appropriate property has been sourced, permission from the local council to subdivide the plot needs to be sought. The length of time it takes to obtain approval will vary from council council- and according to Mr Garson, investors should still be prepared for a 'no'. "In a lot of cases they will end up saying, 'yes'. You just have to jump through more hoops and do more research and give them the extra things they want." he says.

... Depending on which state the property is in, the requirements will also vary. In Victoria, for example, an investor requires two development permits: a planning permit and a subdivision permit, says Mr Garson.

It takes a long time and there can be a lot of fees, red tape, rules and regulations, and many investors have no idea about this kind of thing," he says. "It often puts investors off looking at developments."

However, for those who are willing to push their development through, the returns can (be) considerable.

... Investors should also consider combining the splitter with a renovation to pull out the maximum value from the entire property, particularly when the plan is to keep the front house.

One renovation Mr Garson saw undertaken brought the value of the front property alone back to that of the entire site prior to "They sold the house for well over $1.17 million," he recalls. "The build and renovation cost about $450,000 and they sold the front house with quite a bit less land. The existing house with a tiny parcel of land was then worth basically what they bought the entire property for in the first place.

"They basically got the land on the back for free."

"It was massively profitable, with more than $500,000 of profit, and they made a little on the house by tarting it up, including a new driveway."

Read the full article below.

Property Subdivisions can result in big profits

Below you should see a (pdf) document from SmartProperty Investment magazine titled "Splitting Profits; Stepping into the Development Scene" (May 2012). Paul Garson of Stonnington Conveyancing is exensively quoted in this article for people considering splitting their residential block to subdivide. (Please be patient, as it is a 2MB file, it will take a few seconds to display depending upon your connection speed.) If not, click here to open in a new window.

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