Breaking Up Is Hard To Do

Doing the groundwork first will help uncover the hidden costs of subdividing

- Pam Walkley

Subdivision – breaking a property into two or more separate titles – sounds like a simple and easy way to make quick profits, but in most cases nothing could be further from the truth.

Yes, you can make money from subdividing but it usually requires a great deal of effort and a big outlay of cash upfront. “Very often property investors underestimate the financial and time costs of subdivision,” says Margaret Lomas, property expert, author and founder of Destiny, a financial planning firm that helps property investors. “Subdividing doesn’t mean you get a ‘free block’. In addition to the local government charges to subdivide, you will face additional costs like sewer and drainage, engineering, potential retaining walls, driveways for access, fences, benching and levelling, and a whole host of hidden costs. These can run to tens of thousands and sometimes hundreds of thousands of dollars, depending on the original block.”

One hidden cost I incurred when I subdivided a block in the inner Sydney suburb of Balmain many years ago was paying to concrete around a sewer on the new property. This required extensive excavation and was a very expensive condition of development. The outlay was partly offset by adding a cellar to the new house, which increased its value when we sold it 10 years later.

Before you even think about subdividing, you need to be aware of planning rules in your state and area, as these can vary significantly. A rundown of the process in NSW, Victoria, Queensland and Western Australia is available on build.com.au.