28 Mar Making money by splitting blocks – Jo Chivers
Coming up on today’s show we’ll take a look at splitter blocks. We’ve all seen them; beautiful big house blocks that have been split into two and sold off. Looks like an easy process, but is it? Is it actually a good way to make money? We get the lowdown from Jo Chivers, Property Bloom.
Kevin: I don’t know if you’ve ever heard of the term “splitter blocks,” but obviously, as it sounds, it’s where you get a block of land and you split it, whether it’s in half or a subdivision of some kind, to maybe get another property on it or at least get another block of land off it. Someone who is the expert at doing this, Jo Chivers, who is a director of Property Bloom – they’re a development project company – joins me.
Good day, Jo. Nice to be talking to you again.
Jo: Hi, Kevin. Nice to be talking to you again, too.
Kevin: I know that’s a very simplistic way to describe it, but that’s pretty much what it is, isn’t it? A splitter block?
Jo: Yes, I think the term is probably used a lot more in Queensland. We refer to it as straight-out subdivisions. What it is basically is getting a block of land and cutting it in two. That’s a very simple, small-lot subdivision.
Kevin: Typically, these were where a house was maybe sitting on two blocks, and that’s almost like a no-brainer. That’s where you can move the house over and get a separate block. Is that the most common form, Jo?
Jo: I know that’s used a lot in Queensland, too, shifting a house over. If there are two titles already, that’s a very simple way to do it because you already have your subdivision through. Commonly, what we look for is a house on a large block. It might be on 800 or 1000 square meters, but it’s quicker and easier not to have to move the house if the house is located in a good position over to one side.
Typically, where we develop, mainly around the Hunter area, there are 1000 square meter blocks and the houses are nice and conveniently located over to the side. They’re typically 20 meters deep by 50 meters long, and we can cut that in half without having to move the house, but there is still a lot of work to do when you’re subdividing.
Kevin: Let’s run through what some of that work is. I imagine you have to get all of the services there, as well.
Jo: Yes. That’s the main thing. When we look for land that we want to subdivide, we’re looking at where the services are located and particularly the slope of the block, the gradient of the block.
If that block of land is sloping towards the rear and not towards the road, then that could be tricky if there is no drainage easement in place because you always have to look to where you’re going to drain that newly created lot. We mostly want to drain it to the street. That’s the easiest way. If it’s sloping away from the land, we have a look to see if there are any drainage easements in place. If so, that’s good; that’s easy, too. We can drain to the rear.
Typically, in older the suburbs, or more established suburbs, there is not an easement available. In that case, you would then have to negotiate with neighbors to basically drain through their system and create an easement, which can be very tricky and take a long time. If the block is sloping backwards, we give that one a miss, move one, and look for one that is more suitable, sloping to the street.
We also look for things like curb and guttering. If it’s corner block, for instance, there’s curb and guttering on one side and there perhaps isn’t on the other. This is a red flag for us because usually, councils will want you to then put in that infrastructure. They’ll want you to put in the curb and guttering on the side that’s missing. That can cost you $30,000 to $50,000 depending on the length and how much work is involved there. That, again, is a no; we won’t touch that one because it’s not adding any intrinsic value to the subdivision.
The other thing we look for is where the other services, such as water and electricity, are located because it’s really important that you can actually get electricity to the newly created lot. You might find that the lot actually has an electricity pole right around the corner that is supplying electricity to the block, but then you may need to then install a new pole, for instance, which can be very costly, too.
Service connections are very important to have a look at, and that is one of the first things that we obviously assess when we are looking for our sites.
Kevin: Would it be fair to say that one of the big mistakes that new people make in this area is that they simply don’t know what they don’t know? In other words, you’ve been through a number of issues there that if someone wasn’t experienced, they simply wouldn’t even know what they’re looking for, Jo.
Jo: That’s right. It’s so true to do your due diligence. It’s really important that if you haven’t done this before, then use the services of a project manager like ourselves, Property Bloom, or go to your local surveyor. Your local surveyor will have a wealth of information that they can share with you. They’ll know what the council requirements are, as well.
The next thing you need to understand is what your minimum lots size is – what the council will allow for the minimum lot size. You need to understand the zonings of the land where the land is located and you need to understand what the lot size is.
If you have a 1000 square meter lot, for instance, you want to cut it in half and the minimum lot size is 500 square meters, then that’s great; you can do that. But if it’s more than that, then you may not be able to do that depending on the position where the house is. It’s really important to have an understanding of what your minimum lot size is and the zonings of the land.
Again, your local surveyor will be able to help you usually with those sorts of issues and also give you a really rough estimate of his costs – the surveyor’s costs – but also of some of the civil work costs, like the sewer extension and extending the other services to the newly created lot.
Start with a few questions to council and then go to the local surveyor. It’s really important that you do a lot of work upfront so that you do have a bit of an understanding of the process.
Kevin: If I could just pick up on a comment you just made there, you said, “Ask a few questions of your council, then go and talk to the surveyor,” and maybe even the certifier. How helpful have you found the council? Do you really need to go past the council, or can you get most of your answers from them?
Jo: The council should be very helpful. You can give them the address or the lot and the DP, the deposited plan number, the lot number and the plan number, and they’ll be able to look it up on their system. They can tell you straightaway what the zoning is.
In fact, in the sales contract, if there is a contract available, there should be a county planning certificate in there that will tell this information, as well. It will also tell you if it’s flood-prone or if it’s bushfire-prone. Those sorts of things, as well, are important to understand.
The town planner, the duty planner at council should be able to answer quite a few of your questions, but they’re not there to advise you and they really won’t have an understanding of what the costs may be.
While you can get some information about the land from the council town planner, you do really then need to have the next step and talk to a surveyor or talk to a project manager who has also done this sort of work, and they’ll be able to give you a ballpark figure to start with on the civil works – the driveway has to be put in as well for the newly created lot and also connection of the services.
Kevin: You’re talking here about doing some due diligence. At what stage would you do this? Would you do it before you go to contract? If you’re not – in other words, if you’re putting a due diligence clause on your contract – how much time would you allow yourself, Jo?
Jo: Ideally, you want to have a good understanding before you even start looking for land because sometimes if something comes onto the market, it can move very quickly. If it’s a large enough block to subdivide, then there will be other developers looking at it, so you really need to start with finding a location you want to be developing in or subdividing in and doing your due diligence on pricing.
Is there demand? If you’re planning to sell off that newly created lot, is there demand for land in that area? Or are you going to build on that lot? If you’re going to build on that, why not combine a DA for the building work and subdivision process in the one DA?
It’s all about doing that due diligence, understanding council guidelines, and then searching for your property because if a good one comes up, it probably will move quickly and you may find yourself getting caught up in the excitement of it all and ending up purchasing something that may be difficult to subdivide or costly.
Kevin: Very good advice. You can see there why you would use someone like Jo and her team at Property Bloom. They’re development project managers. Just go to Property Bloom.
Jo, thank you so much for your time.
Jo: You’re welcome, Kevin. Thank you.