Before committing to a development or subdivision, you should find out what the exact development and subdivision costs are going to be for your planned project. This section of the website will explain how establishing the subdivision costs applicable to your planned project is just one part of investigating overall project feasibility. Its important to investigate project feasibility early on, either by yourself if you know how to, or by engaging professionals for help. If you don’t, you might commit to a project that wont make much money, or worse still, commit to a project that will lose money and only find that out at the end.
Because every site is different (slope, dimensions, soil characteristics, location, sewer and power access etc) there is no square meter rate or cookie cutter answer to “what will my subdivision cost”. Each project will require specific investigation into site particulars to establish the cost of subdivision and development for that project. This requires time and expertise to establish- you can learn this or hire it. As noted however, subdivision costs are just one part of the equation in the property development game. Perth has many development opportunities for infill development, and the question “What does it cost to subdivide?” is only the first question you should be asking.
Is it going to be profitable?
This is the more important question that needs an answer. This means considering a wider range of input data. Ultimately, the costs don’t matter provided the revenue and profit margin is high enough. You have to “spend money to make money” however to research and get an answer . The data you need to consider includes:
- Site acquisition costs, including acquisition fees and stamp duty
- Subdivision costs including surveying, project management, site-works, infrastructure charges, and planning fees
- Holding costs and council rates
- GST and capital gains tax liabilities
- Cost of finance (interest, brokerage, bank fees)
- Legal, accounting and taxation advice and fees
- Design and construction fees (for dwellings)
- Sales and marketing costs and agents commissions
- Likely sales value of end product/s (revenue forecast)
Many people do not know whether “the deal” they are looking at is actually profitable because they don’t look at all the data components above. Their research stops at development potential and basic costs, with little regard for other crucial data, meaning they don’t get the whole picture. Successful developers always conduct professional, detailed before they start any property development project to make sure it is profitable, and to engineer the most profitable design solution for the site in question.
Finding out that you are running a loss making project half way through is upsetting for all involved. To execute a profitable development or subdivision in Western Australia requires time and research to put together the best development strategy and design. As aforementioned, this is done with a feasibility study, to engineer the most profitable design solution. If you are about to invest hundreds of thousands of dollars into a project, it is logical to invest some time and money at the start to come up with the right design solution and development strategy for the site. This is so you can determine that there is a solution for the site where project and subdivision costs are substantially outweighed by the profits.
Many of our customers learnt about development and subdivision costs early on in their journey through our education material and services. Some of our customers are now comfortable dong their own feasibility studies with minimal assistance, others still get us to do them. The end result is the same however: with our expert assistance our customers are able to make make sound and informed investment decisions because they understand the cost components of their development.