Many small investors are making money by subdividing residential investment properties that were only eligible for one dwelling under the old R-codes. There continues to be uncertainty around what can and can't be developed on a property and many investors and homeowners unfortunately make big decisions based on wrong assumptions that end up costing them time and money.
My hope here is to give you 4 quick tests to know if your property could be subdivided.
R-Code Changes: a Review
On 2 August 2013, the WA R-Code changes officially came into effect. The changes not only allow developers to build houses on smaller lots, but has allowed many WA residents to subdivide blocks that were previously ineligible for subdivision. We would like to review the highlights of the R-Code changes for those who may have missed out on them in August.
Minimum Lot Sizes are Smaller
Due to changing economic and social conditions, developers are facing pressure to provide houses on smaller lots that require less maintenance. For example, the minimum lot size for a house that is on an R20 lot is now 450 m2 (not 500sqm). R25-40 and R60 have also undergone decreases in lot size.
Glorified Granny Flats
Before 2 August, any ancillary dwelling on a property was under requirement that only family members were allowed to live there. Thus, it was called a “Granny Flat.” Under the R-Code changes, ancillary space can now be rented out to people who aren’t relatives. In addition, the allowable floor space has been increased to 70 m2 and they can be added to any green title lot providing the maximum floor space for the lot is not exceeded.
Small Lot Planning Approval
Under the new R-Codes, a green title lot as small as 260 m2 can be submitted for development approval for a single house. This code also pertains to any Local Structure Plan or Local Development Plan. However, if the code disagrees with any local planning scheme, the local planning scheme supersedes the R-Code.
The 4 Tests
Here are the four quick tests to let you know whether or not your property is subdivisible.
Find the R-Code
We know this sounds obvious, but the first step is to find the R-code of your property. This can be done by checking your property on the Table1 contained in the current R-codes: http://www.planning.wa.gov.au/637.asp.
You also need to check with the council to see if there are any proposed changes in the works that may affect your property’s R-code. You may very well want to wait for a proposed change if your results aren’t as you wish. Make sure you take councils time frames with a grain of salt, the process for rezoning can be very drawn out and there is a big hold up of submissions at West Australian Planning Commission that is a major bottleneck to the process.
The next test is to find the average area required for a dwelling with your R-code and divide the total area of your lot by the average area. Drop the part after the decimal (use the whole number only) and that will tell you how many lots you can make out of your property if other factors are in line.
There will also be a minimum area, which is actually put there to help you subdivide. It is relevant in cases where it is difficult to split your block into equal areas. Your blocks can be unequal as long as each of them is larger than the minimum area. This can help you immensely if you have an irregularly shaped block or an existing house that you want to retain when you subdivide it.
Your property must have easy access to services such as water, sewer, phone, electricity and gas. You can simply carry out a Dial Before you Dig service check on all services. If you don’t have easy access to services, you will need to consult a builder to find out how much it is going to cost.
What This All Means to You
If you are a small investor or homeowner who has a lot that can now be subdivided, you now have a chance to make money by either selling the property to an investor or developing it yourself. If you are a larger developer, it means that you can now maximise your income while satisfying the changing needs of the current generation of home buyers.
If the trend continues, today’s small lot could be tomorrow’s mid-sized lot.
About Jarrad Mahon
Jarrad is the director of Investors Edge Real Estate.
Jarrad thrives on helping hundreds of investors every year formulate a clear plan to get the best returns from their Perth property. This requires a carefully thought out and innovative approach to understand your situation and help you to make the right move at the right time.
His renowned personalised "Property Success Plan" takes you step by step through how to make thousands of extra dollars and avoid the costly mistakes that Jarrad has learnt the hard way by investing himself all around Australia.
Over the last five years he has used his engineering background to build and refine a unique property management, sales & investing process that is sure to impress while getting you real results.
A sales and marketing expert, Jarrad combines the latest technology and cutting edge sales strategies to sell homes across the whole of Perth metro area.