The R-Code changes that went into effect on 2 August 2013 have created a fair amount of confusion among homeowners and small investors. Some unsuspecting homeowners have sold their homes at severely undervalued prices because they didn’t know their blocks could be subdivided or developed; others are thinking about subdividing but don’t know if they can or not. There are also many investors that discover they have paid purchased a property, paying through the nose for subdivision potential only to uncover serious limitations in what can be done and cost blow outs that destroy their returns.
Recently, we came up with a series of four tests that can help determine whether or not a property is eligible to be subdivided.
Test One: Find the Correct R-Code
Any property owner can find out the R-code of their property from the local council. It is also necessary to find out about any planned zoning changes that could affect the property’s R-code. You can then look up the site requirements for subdivision which is in an easy to read table (Table1) contained in the latest R-codes, available on the Planning Western Australia website- https://www.planning.wa.gov.au/637.asp
Test Two: Find the Average Area
After finding the R-Code, the next step is to divide the total area by the average area required for that code (given in R-Code Table 1). The number on the left side of the decimal is the number of blocks that the property will yield after subdivision. For example, a 1,125 sqm block divided by 450 sqm average area required under a R20 zoning, would be 2.5. If you only use the number on the left side of the decimal, you see that your block can be subdivided into two lots.
Test Three: Find the Minimum Area
There is also a minimum area into which any block can be subdivided. In the case of a block that has an irregular shape or other factors such as an existing house sitting too far back in the block, this could impact how the property can be divided. In our example the minimum area for an R20 zoned property is 350sqm.
Test Four: Availability of Service Access
Phone, water, sewer, gas and electrical services must be available for each individual block after subdivision. It is crucial to call or search Dial Before You Dig to ensure that essential services are available for any subdivided lot. If they aren’t readily available, it will cost extra money to provide them. This will have to be included in the projected costs of subdividing and can easily take away any potential profit.
If a property is eligible to be subdivided, the owner is left with three options: do nothing, sell the property the smart way by marketing it’s development potential, or develop the property for sale or rental. Either way it pays to understand what could be done using the above tests and consult a sales agent that specialises in property investment that can help you maximise your returns.
To Learn More
Speak to real estate agents that specialises in investment properties in Perth—it is free and well worth the investment of your time.
Jarrad Mahon is the Director of Property Management, Strategy and Sales at Investors Edge Real Estate in Perth. They provide a full range of services that allow investors to feel confident that their properties are in good hands. Call 1300 472 427 for more information or visit their website: https://www.investorsedge.com.au/.