MOVE OR IMPROVE OR SUBDIVIDE

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1 MOVE OR IMPROVE OR SUBDIVIDE If you're lucky enough to own a big block of land you could be sitting on a gold mine. Adelaide couple, Leisha and Blair, have outgrown their three-bedroom home but before they sell up and buy a bigger place they're interested in finding out how much they could make by subdividing their property. Baz will pop by to discuss some options while money man, Jason Cunningham, crunches the numbers and offers some advice that will could see this couple seriously cashing in.

2 SUBDIVISION According to the Urban Development Institute of Australia 2016 National Land Supply Study, average lot size decreased 29% between 2004 and 2014 from 542m² to 423m². Councils around the country have decreased the lot size they will permit, allowing homeowners to subdivide their properties into smaller blocks. Rules vary from council to council, so check with your local council about their regulations but in general blocks larger than 700m² can be subdivided into two, with some councils allowing blocks as small as 600m². Subdividing property is a great way to boost profits. When you divide one property into two or more you can add value to the property simply by registering the new lots. If you take a look around your suburb and there are other properties in your area that have been subdivided, it is a good indication that if your block is big enough it may be suitable to be subdivided. Keep in mind that dividing land is a costly and timely process. It is recommended that thorough research and proper preparation is made before beginning the division process. Make sure your local town planning council has policies and legislation in place that allows for this.

3 CASE STUDY CURRENT HOUSE Leisha and Blaire plus their two young children live in a three-bedroom house in the Adelaide suburb of Plympton Park. They love the area but are concerned that as their kids grow older they will soon outgrow their house, which is around 100 m². They ve considered renovating but expect it will be costly and worry they may make mistakes and over-capitalise. This has got them thinking about other options, but they are unsure where to start.

4 Since moving into the area around three years ago, the couple has noticed a number of houses being demolished and rebuilt with duplexes. They purchased their home for $400,000 at the end of 2013 and in the last three years the property has increased in value to $480,000- $500,000. Barry suggests they modify their current home to become the 4-bedroom home they desire, and look at subdividing the property into two lots. CURRENT HOUSE RENOVATIONS INCLUDING A 1st STOREY

5 CURRENT HOUSE RENOVATIONS 2 nd STOREY INITIAL SUBDIVISION COSTS Council Fees $16,751 Surveyor $2,500 Plumbing $8,000 Concrete $15,000 Electrical $3,500 Insurance $800 Fencing $3,000 Total $49,551 Subdividing presents the homeowners with various options to capitalise on their large block, so using estimate costs we have focused on the following two:

6 OPTION 1 Renovating the current home, subdividing and selling the vacant block at the back. Renovation costs $163,000 Subdivision costs $50,000 Total $213,000 Renovated house value $560,000 Vacant land value $240,000 Total value $800,000 Total value $800,000 Total costs - $213,000 Profit $587,000 OPTION 2 Renovating the current home, subdividing and building a new 3- bedroom, 2- bathroom home on the second block. Renovation costs $163,000 Subdivision cost $50,000 New house build cost $200,000 Total costs $413,000 Renovated house value $560,000 New house value $500,000 Total value $1,060,000 Total value $1,060,000 Total costs - $413,000 Profit $647,000 While it will take more time and work to achieve option 2, they can look at maximising their profits by an extra $60,000 to $647,000 over the $587,000 price option one could fetch them.