Land Development & Sub-Divisions
Property Investing Strategy
Obtaining control over a large parcel of land, then breaking it into a number of smaller parcels. Pending approval from local council authority, the investor can then create a housing estate or simply sell each parcel separately.
Investing in a subdivision means gaining control over a large house block, splitting it into two or more parcels and then sell each individually.
Keys to make it work:
- Good cash flow
- Knowing the council dealing with
- Teamed with experienced staffs
- Picking the deals from the right area
- A well-written option contract
Financial Requirements:
Partnering with someone who has a solid funding resource is essential to the success of large-scale land development project, while a subdivision strategy is more suitable to smaller investors.
Time Frame and Exit Strategies:
Both land development and subdivision plans need to go through the process of council approval. The time frame to obtain a council approval could vary from few months to longer than a year depending on the complexity and difficulty of the project. Once the proposal is approved, investors can either sell for a capital gain or lease the property for residual income along with potential higher growth.
The Return Perspective:
Both strategies potentially have relatively high returns within a short period of time (6~18 months).
The Advantages:
Investors don't have to rely on market forces to generate growth using these strategies as the growth is manufactured. Investors are able to generate sizable short-term returns from working on one piece of investment.
The Potential Risks/Difficulties:
Money will need to be spent before the project can even start. Establishing an option contract, applying for council approval and the holding cost for the investment assets are the costs that won't be recovered if the investors can't obtain approval from the council.
For a sizable land development project, it often requires investors to have their own earth -moving equipment and a sizable staff team. However, they can hire labor and equipment, which can be costly.
Experienced business partners and good funding are crucial to the success of this type of investment; however, they are not easy to find.
For a subdivision with areas of a small population that have open plan living as part of council town planning strategies, they are less likely to allow subdivision of smaller parcels of land.
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