How do you subdivide?
To subdivide a backyard in an established suburb you must first appoint a professional to design a house that fits on the vacant section of land you are creating. This design must then be lodged to your council for approval to be built. This approval from council is known as a ‘planning permit’. The approved planning permit will normally have between twenty and forty conditions attached to it. When the conditions on the planning permit are met Council will issue a document called a ‘Statement of Compliance’. You cannot get a statement of compliance until all the conditions on your planning permit are met. On issue of the statement of compliance you appoint a conveyancer to register the subdivision with the land titles office. When the titles office complete the registration of the subdivision the new backyard can be searched by its new street number and the subdivision is complete.
How long does it take?
It will take a minimum of 9 months to obtain your statement of compliance and title as described above. The simplest backyard subdivision is of a corner site and these take an average of between 12 and 18 months to complete.
For a more detailed description of the 11 steps that occur during this time period click here for a free helpful PDF.
How much does it cost?
The costs of permits, plans, consultant’s fees and application fees will be a minimum of $40,000.00 to complete a backyard subdivision.
In addition to this you should allow the following fees for onsite works that need to be completed to obtain your statement of compliance from council:
- $18,000 – $23,000 to install an underground drainage system to effectively direct stormwater from the site to the legal point of drainage discharge;
- $550 - $3,000 to install an underground electricity connection point for the new lot;
- $1,500 to install a new paling fence to separate the existing house from the new block for privacy;
- $1,600 - $2,500 in a contribution fee to the sewer and water provider (e.g. Yarra Valley Water, Western Water, South East Water) to issue consent for a plumber to connect the new block to sewer and water.
- A minimum of $2,500 to widen the crossover to a double width for the site. If you are constructing a new driveway and crossover you should source a quote from a concreter to complete the pour.
- $10,000 for a fully built carport extension for the existing home.
- If you need to remove trees from the backyard you should source a quote from a tree removalist based on the number and size of the trees.
Can I pass these costs to the buyer of the backyard?
This work is required to be completed as a condition on the planning permit issued by the council. If it is not complete the statement of compliance will not be issued and the subdivision cannot be fulfilled. This means you don’t have a street address for your backyard and have nothing to sell a potential purchaser.
Why can’t I pass these costs to the new purchaser?
It is unfair to charge a potential buyer the price of a block of land if they are not provided the infrastructure and services that come with it. By making the seller of the backyard incur the above fees it means the buyer is getting a block with the same services as all of their neighbours.
Will Council allow my subdivision?
If your site is in a residential zone and has the following features it is appropriate for a council approved subdivision:
- Is free of a restrictive single dwelling covenant (refer to the Section 32 for the property to confirm);
- a distance of greater than 3 metres between the side of the house and the side fence for a driveway;
- A depth of greater than 16 metres between the back wall of the house and the back fence of the property;
- A width of greater than 18 metres.
The above dimensions are indicative only and cannot be used as a ‘hard and fast’ rule. For example your site may only have a distance of 14 metres between the back wall of the house and the back fence of the property but the width of the site is 22 metres. Although not meeting one of the criteria above the additional site width would make the site appropriate for a council approved subdivision.
To confirm if we work in your local council click here.
What are the common pitfalls?
People expecting to make a massive profit margin by flipping the property with the approved planning permit from Council. People dont realise they must meet all the conditions of their planning approval to complete the subdivision correctly.
You will have to pay the amounts listed under the ‘How much does it cost?’ section above to complete a backyard subdivision. You cannot sell the backyard and pass these on to the purchaser.
The minimum timeframe to complete the process is 9 months, with the average process taking 12 – 18 months.
Don’t expect there will be a ready market for your backyard when you complete your subdivision. Yes, you may have land available in your suburb for sale cheaper than blocks with houses, but don’t be surprised if buyers are put off by the prospect of having to build themselves. You will likely be more successful in selling your subdivision to a local builder who can then build the home and sell it at a profit. Yes the builder will make a profit when the development is finished but you will make your profit before this and can move on to something else with your time.
What is a realistic profit margin to expect from a backyard subdivision?
If you build the approved home and sell it as a house and land package you should expect to make 15 – 22% of the price you sell for. Anything in excess of this is a good/excellent return.
If you sell the vacant land as ‘ready to build on’ you should expect to make 35 – 45% of the price you sell for. Be aware that there is more of a market for house and land packages than homeowners who want to build a home. Refer to the ‘What are the common pitfalls?’ question above.
To view photos of subdivision projects we have completed click here.
What do I do first?
If you own a site, have done the steps recommended in this article and believe you can proceed with subdivision reach out to us via this link for a conversation with a subdivision expert who would be happy to answer your questions.