Subdivision is a great way to wealth creation. So how do you get started?
Property investor Rod McShane suggests: “The smaller the subdivision, generally the less risk. A house on a large block suitable for two dwellings may be the ideal first time subdivision.
“Consideration then has to be given as to whether you’re building a second dwelling to keep the property long term or to sell it off and place the money back into debt reduction of an existing mortgage.”
Many property commentators recommend developing a property to create positive cash flow to assist in reducing debt on existing loans or even purchasing further property for your portfolio.
One investor, Martin Ayles, discovered property development by accident. He had been renovating and selling for many years when an opportunity arose for him to subdivide an allotment with an existing house.
When a profit resulted, he realised what he’d been overlooking and has been hooked on subdividing ever since.
“Subdivision is an extremely powerful method of dividing to multiply your profits, however, if you sell everything, money’s easily spent. I recommend a ratio of about five to one, so for every five that you build, retain a minimum of one,” he advises.
“I’d also suggest trying to get the properties generating cash flow rather than having them negatively geared.” That way you could develop five properties and keep one to pay your profits into, reducing debt down so the weekly rent could more than cover the mortgage.
If you have a question about real estate, or would like assistance in locating a property, feel free to phone me, Noel Thompson Principal Professionals Logan Lifestyles at either Browns Plains 3800 4000, Marsden 3200 4495, Springwood 3808 5544 or Waterford 3299 7733.
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