Part One: Feasibility of a Land Subdivision

What is a land subdivision?
First, we need to start with the land subdivision basics. Land subdivisions are a kind of property development where a developer splits a property into smaller sub-properties. The technical terminology is subdividing a lot into smaller lots. 

The first step in a land subdivision is to determine the financial viability of the project; not all subdivisions make sense.  

This article is the first in a multipart series about How to do a land subdivision?

Part One: Feasibility of a land subdivision (beginner)
Part Two: The land subdivision process (beginner)
Part Three: Modelling feasibility in excel (medium)
Part Four: Modelling feasibility in Argus EstateMaster (expert)
Part Five: Selling lots in a land subdivision (beginner)

How much does a land subdivision cost?
There are three kinds of costs you need to consider when determining the feasibility of a subdivision. The costs are:

  1. Professional costs – you will need to engage several experts to prepare reports and plans for your subdivision. The price will vary based on the scale and location of the project.
  2. Development costs – you will need to pay a civil contractor to complete the civil works and in some cases, demolition experts. The pricing will vary based on scale, location, terrain. Other costs to consider are servicing costs (sewer, water, electricity, telecommunications and natural gas) and offsetting costs to remove native vegetation  
  3. Statutory costs – you will need to pay some fees to the local council and often also to the state government. These fees are dependant on the local government area, the location of your site, and what flora & fauna are on the land.

The costs of a subdivision vary greatly and are highly specific to your individual circumstance. Click here to speak to a qualified town planner to get an estimate (this is quick and free). 

How long does a land subdivision take?
The length of time a land subdivision takes is akin to asking how long is a piece of string. You need to factor in time for the survey, which must be done before other specialist studies commencing. Following the completion of specialist studies, you can complete a planning report. Then you can lodge a development application for your land subdivision. After the development application is approved, you must make a construction certificate application and await approval before commencing civil works. You then require certification and a subdivision certificate before completing your sales. 

Read Part 2: Process here for more information on the process, click here to speak to a qualified town planner to get an estimate on how long your land subdivision may take (this is quick and free). 

Where can I find finance for a land subdivision?
Land subdivisions are usually a combination of debt and equity. You will need to invest some equity before a lender gives you debt funding. Equity has an opportunity cost associated with it, and debt has an interest cost and usually a line fee.

Most lenders like to separate costs into land acquisition costs and land development costs. You will most likely need different amounts of equity for these two components. A typical setup is to provide 25% of the acquisition equity and 35% of the development cost equity; however, lenders consider your unique situation. 

The big four banks, depending on several factors, will lend on these kinds of projects. It is also worth considering private lenders and other banks. 

Precise Planning has assisted in project managing and preparing planning reports for hundreds of land subdivisions in NSW. If you would like to speak to an expert about your land or an idea for a property contact us here.



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