Is Subdivision A Good Investment Strategy?

Land subdivision is seen as a creative investment strategy as it allows you to create new allotments which you can sell, rent or build on. Once you subdivide your land, you can utilise its development potential by allocating a portion to your family and developing or selling the rest. However, before you subdivide the land, you might want to consider the following.

Deed restrictions

Before you buy land, be sure to check if the original owner put in place any deed restrictions. The same applies to land that your family owns. If there is a deed restriction put in place by your grandfather stipulating that the land should not be subdivided, the land can't be subdivided unless the restriction is lifted.

Keep in mind that deed restrictions are difficult to lift; therefore, be sure to check the records if the land has restrictions. If it does, talk to a lawyer who will guide you through the process of lifting the restrictions.

Feasibility analysis

Property development is more than just choosing a lot and erecting a building of your choosing. It's a process which begins by identifying a piece of land. You also need to conduct a feasibility analysis of the proposed project before buying the land.

If you intend to subdivide the land, be sure to conduct a subdivision feasibility assessment. This will help you understand whether the subdivision is a viable option or not. It will also unearth any restrictions, easements and local authority requirements that might impede subdivision.

The complexity of the project

If you're subdividing half an acre or an acre, the process is not as complicated as subdividing a large piece of land. The difficulty increases as the lots increase since most of the lots will not have access to utilities and infrastructure such as public roads. In such scenarios, you will need local authority oversight plus additional investment.

Connecting the lots to the utilities will come at a hefty cost; thus, you need to factor in the cost in your feasibility studies. For example, if you're in Western Australia, what's the cost of connecting your lots to services such as water, sewer and power?

To connect all these lots to the utilities and infrastructure, you'll need approvals from the local authority. The local authorities will want to understand how your subdivision, especially for residential use, will affect the community. Developers understand the importance of infrastructure in any residential development. Therefore, if you want to subdivide land for residential development, you need to evaluate the impact of your project on the existing infrastructure.

For more information, contact a land division service.