1 into 3 subdivision. Success Story – Russel Gray

1 into 3 subdivision. Success Story – Russel Gray

 

In today’s show we talk with Russell Gray who earlier this year, bought a block of land and did a “1 into 3 subdivision” when everyone else could only see a 1 in 2 subdivision.

 

Transcript:

Kevin:  My next guest is from Bribie Island in Queensland, just out of Brisbane. He works for a building company, and he’s taken part in a number of different subdivisions in the area over the last few years and helped clients who wanted to build or sell to manage their projects. In February 2014, he bought a block in Brighton in the northern suburbs of Brisbane and did a one-into-three subdivision.

Russell Gray is my guest today. Hi, Russell. How are you?

Russell:  I’m great, Kevin. How are you?

Kevin:  I’m well, thanks, mate. Tell me about this development. Why did you choose to do this one?

Russell:  I’ve done a couple of one-into-twos and two-into-fives. I work with a building company, and we were actually looking for land. It’s pretty scarce around in that Brighton/Sandgate area. This was just under the touch of 1200 square metres (1184 square metres), but it had a 32-metre (nearly 33-metre) frontage on it. We thought we could maybe squeeze three blocks in there and build three homes.

It also had a back-up of a one-into-two DA already on the block, so we knew we could get at least two in there. Numbers-wise, if you’re doing it as a development, it wouldn’t work as a one-into-two, but one-into-three worked pretty well.

Kevin:  How sure were you that you’d be able to get a one-into-three? Obviously if it didn’t stack up as a one-into-two, you probably wouldn’t have bought it.

Russell:  As a building company, it worked enough to have a profitability in it. Our town planner who we went to was about 95% sure that we could get a one-into-three out of it as it stood, but we would have had to build the houses prior to getting our plan sealing.

We looked at it, and we had a bit of a look around it. It was a bit of an odd shape. We thought maybe we can talk to one of the neighbors and get a little bit of extra land and make it easier so that it was actually compliant to a one-into-three.

Kevin:  Just to backtrack a little bit, it had approval for one-into-two, you thought you might be able to get a one-into-three, but if you added some extra land to it, it was probably going to be a lot easier. How much more land did you need, Russell?

Russell:  Sixteen square metres.

Kevin:  Just a small parcel.

Russell:  It is. The block at the rear of one side actually was a really odd shape, and it had a small amount of land right down in the back corner, which was behind a couple of sheds and basically had just a tree and a pile of rubbish in it when we looked over the fence.

When we looked it up, that guy had it as an investment property. Twenty square metres off his 670 square metres isn’t going to make any different to what he could do with his parcel of land. So we approached him, and thought he’s the most logical person to be able to get some land off and put into ours. We made an offer to him.

Kevin:  How much was the offer, Russell?

Russell:  We ended up paying $20,000 for 20 square metres, which was a little point in his back corner, basically.

Kevin:  So, a good deal for him, but an even better deal for you, really.

Russell:  Yes. It obviously turned the profitability around on the project as far as the land subdivision, and it also put it through Risk SMART in Brisbane City Council. So instead of having to go the long way round, we knew we were going to get one-into-three straight off.

Kevin:  What’s a block of land worth in that Brighton area? How much value did you add to the development, do you think?

Russell:  Around $270,000-odd. It cost us quite a bit more, obviously, but that was the difference between two 500 and something square blocks probably worth about $290,000 and our 300/400 squares worth on average around $280,000.

Kevin:  You added to the value of the blocks of land, plus you actually got an extra block out of it. You probably would have, anyway, but you were sure of getting it this way.

Russell:  Absolutely.

Kevin:  You added greatly to it. Tell me, how do you go about evaluating if a particular subdivision is going to be more profitable for you?

Russell:  You start with the end in mind always. We look at it and ask: what’s a block of land worth in that area? This one was pretty easy. I’d done a couple of one-into-twos, and I knew what I’d sold. There was a new subdivision up the road, and they was selling from $240,000 to $300,000 and something for different blocks in there. We’d sold $285,000 or $290,000 around in different areas.

This was not as good an area, obviously, as the $290,000s but better than the ones that were $240,000. We knew what it was around; we had buyers at the other end who were willing to buy house-and-land packages.

Always start with the end and then work backwards. How much do you want make out of it? How much it is going to cost you to go there? That’s what it’s worth. That’s the way I look at it.

Kevin:  What sort of costs do you have to build in when you do a subdivision like that to get the services onto each of those blocks, Russell?

Russell:  With that one, we had to do a new DA, and it was quite a lot. We ended up, I think, spending about $170,000 to do the Development Approval engineering, put the services on, put in a couple of new drains, a piece of footpath, all your plan sealing, and obviously your town planning and engineering consultants.

Kevin:  So about $60,000 a block, roughly?

Russell:  You’re creating two new ones, so about $80,000-odd, $90,000 per new lot.

Kevin:  Of course. Your original site’s going to have all those services.

Russell:  Yes, that’s right. You pay for two new lots. You have one, and you pay for two new one. They’re around $80,000 to $90,000 now per lot when you do it that way.

Kevin:  Excellent, Russell. Great talking to you, mate. Congratulations on that. Great to hear a success story like that with a bit of twist. I appreciate your time, Russell, Thank you.

Russell:  That’s all right. Thank you.

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Kevin Turner
kevin@realestatetalk.com.au
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