How I identified and secured a high-value subdivision project through swift analysis and decisive execution

This 974 sqm property with a post-war weatherboard house hit the market on Friday, 8 May 2015. I spotted the listing the next morning while preparing for a weekend getaway to the Gold Coast. Sensing an opportunity, I immediately conducted my due diligence and feasibility analysis and submitted a cash, unconditional offer by midday. Although my offer was not the highest, the vendor, who required certainty for their next move, accepted it due to the clean terms.

There is no perfect subdivision site. At 9 Laurie St, the block fell short of the 1,000 sqm typically required for a battleaxe subdivision and presented challenges including overland flow and a relatively steep backyard. However, my town planner supported the project, noting that the neighbouring property had successfully completed a similar subdivision, establishing a strong precedent. In addition, the site is just 380 m walking distance to Westfield Carindale, further strengthening its appeal.

By lunchtime on Monday, my core team, i.e. town planner, surveyor, civil engineer, and hydraulic engineer, had each completed preliminary assessments confirming the subdivision potential. At that point, the project was effectively secured.

My strategy to manufacture equity is to subdivide one lot into two, retain the existing house at the front, build a new house on the rear lot, and hold both long term. New or near-new homes consistently command higher prices and rental returns compared to older properties. Selling would mean giving up quality assets that can continue to grow in value and generate income over time.

The subdivision progressed smoothly. 11 months later (May 2016), the rear vacant lot was valued at $370,000 and the existing house at $520,000. This resulted in $227,104 (34%) in manufactured equity, all while I was still working full time. I refinanced the rear lot and accessed $108,000 in equity to fund the build.

In fact, I had already commenced the build project three months prior to subdivision completion. Delivering a successful build requires designing the right product for the block and location, without overcapitalising or undercapitalising. The rear lot (9A Laurie St) presented its own challenges, including an upward slope and overland flow at the front. However, once completed, the home was highly appealing, effectively eliminating the perceived limitations of the land.

One key challenge was the $40,000 retaining walls. After the building pad was cut, construction paused to allow installation of retaining walls requiring approval due to their height. An as constructed survey revealed that sections encroached 6.5 cm to 10 cm over the boundary. Rather than delay the project further, I negotiated a cost-sharing arrangement with the contractor for updated engineering reports and approvals. The lesson: engage the right contractor and ensure retaining walls are built well within boundaries.

Aside from this, the build proceeded smoothly. The completed home was valued at $925,000 in January 2020, generating $156,395 (20%) in equity. While I would typically refinance to access this equity, APRA’s responsible lending guidelines limited further borrowing at the time.

The combined subdivision and build strategy increased rental yield by 1.8%, achieving 5.6% compared to 3.8% for a standard buy-and-hold approach (one older home at $650,000 and one new home at $925,000). I also saved $43,843 in acquisition costs.

Ultimately, the real reward of subdivision and build projects is the equity manufactured, providing the leverage to fund future projects, scale a portfolio, and accelerate the journey toward financial freedom.