Why Dual Occupancy?Why do a Dual Occupancy subdivision?
A dual occupancy development can liquidate the hidden asset in your backyard. You can just do the subdivision and sell the new lot to pay down your mortgage if you have one or invest in anything worthwhile. Or you can build the new dual occupancy home. Enjoy the move into the brand new home with its dream kitchen and either sell the original home probably CGT free. You also have the option of renting it for that extra income- a great way to release equity for semi or retired persons. How do I dual occupancy and enjoy the benefits of the property subdivision? A dual occupancy occurs when a permit is granted by your local Melbourne Council to build two dwellings on a block of land which can also be subdivided to create two individual lots of land. A triple occupancy would allow three units on the land making the land cost per unit even less. Read more. Dual Occupancy development types. Dual occupancy developments could retain the existing house and build one new house in the backyard or in the front yard depending on size, depth, access and how one meets the local planning requirements. Other forms of dual occupancy subdivisions occur when the existing house is demolished to make way for two brand new houses which could be one behind the other called a tandem design or side by side which is called a duplex style property subdivision. In both instances access, site frontage, depth, orientation and stretscape play a key part in the design. Should I demolish the existing home? The typical dual occupancy subdivision is the tandem style arrangement. When the existing house is retained in the dual occupancy development, one’s capital is preserved because the asset purchased, that is the value of the house on the land, is retained. The house has value so think twice before you consider demolition! The only time one should consider demolishing the house in a dual occupancy development is if the house is in very poor order or there has been significant growth in the value of the property. In Australia- and in particular Melbourne and Sydney, there are suburbs where the value of the land outstrips the value of the actual house! In most middle and outer suburbs the houses have great value as it generates rental income and is easier to finance by typical lenders. For example, if the house is retained in the dual occupancy development, banks could lend 80-95% of the value of the property. If the house was demolished, banks tend to lend only 65-70% of the value of the land as the house has been removed. This preservation of capital in the eyes of the lender reduces the risk because if, for any reason, the development does not go ahead, the asset retains its value. Even after the redevelopment, the value of the existing dwelling is by and large retained. The existing dwelling also generates cash flow during the planning process and in some cases even when the development is underway. This cash flow cannot usually be generated from a vacant allotment. Can I subdivide my home? Most properties can be subdivided. While its easier to do so on some properties in others there are challenges which may require structural changes to the existing house. The depth, width and orientation of a property plays a key role in property subdivision. Dual Occupancy Benefits Dual occupancy property subdivisions are profitable because it maximises the value of the land. Two houses generate two rental incomes. Even if you sold say the existing house, chances are it will be free of capital gains tax which might pay off your mortgage, any debts or release cash to be used for other worthwhile ventures. Very often, after the dual occupancy subdivision is completed, the original home is sold for almost the price one paid for the whole block of land with the house. The second house then becomes the cream. Dual Occupancy Sites suitable for property subdivision. There are a myriad of things to consider when finding a suitable dual occupancy development site suitable for subdivision. Some of these are listed below. There should be a 3m wide driveway access to the rear yard if that is where the dual occupancy home is to be sited or check to see if two crossovers are allowed by your local Council The site length and area should allow adequate north facing open space for recreation and landscaping The site should be close to infrastructure, schools, shops and transport The title should be clear of restrictions and preferably without any easements All the essential services should be available onsite or in close proximity and run in the most advantageous position The site orientation should be perfect so that the amenities of neighbouring properties are not adversely affected The zoning of your land and it’s associated Schedule should not be restrictive The planning overlays on your land should not be too restrictive The site should be fairly level There should be little or no significant vegetation on the site and on abutting sites within say 5 m of the common boundaries A soil test should demonstrate the foundations will not require additional strengthening There should be no encroachments on your title boundary or by your property on adjoining allotments There should preferably be precedence for similar development in your neighbourhood especially if you are trying to get more than two new homes on the land There should be no planning overlays burden Your local Council should encourage development to meet their housing stock forecast Summary A dual occupancy development is the subdivision of one lot into two lots. In Melbourne the middle and outer suburban allotments are usually ideal for dual occupancy subdivision development. Iner city locations will require less land for development while those in the mid to outer rings will require around 300sqm per lot depending on the zoning and neighbourhood character. A dual occupancy development can preserve capital, diminish risk, and generate cash flow. A dual occupancy development increases the value of the land A dual occupancy or medium density development can be profitable as long as you do your feasibilityanalysis with care A dual occupancy releases cash from a backyard you might not be using Get the best advice first to achieve the best results and to avoid future disappointment. So where do I start in my property subdivision journey? Here is a general check list: Finance is your first step in any development. Don't run out of cash so do your homework and work within a cost budget How much should you buy a development site for? Here is a simple formula. The New Residential Zones in Victoria are complex when it comes to property subdivisions. Understand the council planning requirements for dual occupancies or triple occupancy in the area. Read council’s planning scheme and the schedules which apply. The scheme will let you know the minimum size of land you’ll need for your dual occ and what type of development is permissible. Check for overlays- especially those relating to bushfire where restrictions could occur. Property Location is paramount for a profitable property subdivision. Infrastructure, availability of services, schools, shops, recreation spaces, employment coridors, views, cultural context and transport add value to your development Site assessment is the foundation. Search for land that meets the dual occupancy or triple occupancy criteria. Talk to us. We know which sites work. It’s a complex exercise best left to professionals who will be with you all the way. GET YOUR FREE SITE ASSESSMENT TODAY Size of land is important. If it’s a duplex site, you may need a minimum of 16-25 metres frontage in mid to outer suburban rings and less in the inner areas controlled by City of Melbourne, Yarra to name two. Check the title, Title Plan and Planning Certificates. Check the planning certificate to see if it is in a bushfire or flood zone. You can still develop in these areas but it will add to your build costs. Check the title for covenants or agreements. Building Cost Budget. This is very important as the builder will look at the land from a different perspective. We can assist you with the building process too and a cost budget to measure your progress is a great idea. Run your development feasibility to ensure the project will be viable. Run one in the reverse format to work out what is the maximum amount you should pay for a site. Of course this will not apply if you are subdividing your own home or land or doing a dual occupancy in your own backyard. You will need to find recent comparable sale prices from which you can base your end value estimate on this. Talk to agents about the current rental market and what rent could be expected to calculate the projected yield on completion. Most importantly, you need to have a good understanding of the build costs. We advise to do a Cost Budget to set your goals and control any overspending. Over capitalising or getting emotionally bound to a development could cost you in the end. Long Settlement terms help. If buying a development site, a long settlement period helps and obtain pre-consent from the vendor to lodge a Town Planning Application pre settlement. Town Planning and Building Permits. Once you have all the approvals, you can then go back to your lender to obtain your unconditional construction loan. As soon as this is in place, the builder can start. Construction. The build phase for a dual occupancy should be around four months upwards and usually around eight months for a double storey to Certificate of Occupancy stage. Once the building works are completed, an occupation certificate will be issued. Don’t forget to order a depreciation schedule; this is simple, just email the plans and builders tender and any other cost details to your quantity surveyor. Depreciations can be very attrtactive as long as you hold the property. Build Equity through the property subdivision. You can now apply for the subdivision certificate and once council issues this, you can register the subdivision (after your lender has signed off on it). There is no need to register immediately if you are planning to hold and not planning to refinance as you may find costs such as rates may be a little less if the dual occs are kept on one title. You may decide to “flick” one of the lots with its own title to a builder or developer who is cashed up to start building now rather than waiting for the 6-12 month period it usually takes to come to this stage. So you have built equity and value through your subdivision, Welcome to the world of property development and successful subdivision! What are the costs associated with a property subdivision? There are a number of costs associated with doiung a successful property subdivision. To begin with you need to factor in professional fees, council contributions, cost of land, coist to build, cost to subdivide and more.
2 Comments
8/11/2017 09:00:59 pm
I recently found many useful information in your website especially this blog page.
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8/11/2017 10:38:09 pm
Thanks for enjoying the blog There is a lot more to read and learn about at AuArchitecture.com.au Knowledge Bank
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