June 4, 2014 by Dymphna 8 Comments

Is That Splitter Worth The Cost?

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If you’ve got your eye on a property block and you’re thinking, “I’ll do a splitter with that”…

Be sure that it’s worth the cost.

Most likely, doing a splitter IS worth the cost and quite a bit more…

But it’s often easier said than done.

Underestimating the cost, time and effort to make it happen often overwhelms the novice real estate investor…

Be prepared for this journey

So make sure you’re prepared for the journey.

For instance, if you don’t yet own the property…

Be sure to add a subdivision approval clause in the contract…

You don’t want to find out after you’ve acquired the property that a subdivision of it will never be approved by the council…

Or that there’s an environmental element that you hadn’t considered.

It’s not that splitters are that difficult to do…

But the fact is, no two splitter properties are the same.

There are many factors to consider that will directly impact the cost and ease of getting council approval…

It begins with the town council

And your town council is where the whole process begins and ends.

Whether you own the property or not…

Always go to the town council first and some very polite questions.

First, find out if there’s any kind of prohibition of doing so in your area or on the property in question.

If there is a prohibition (or more than one), find out what they are.

Then, ask the council if there are any exceptions to those rules…

And if there are, find out the process to apply for an exception…

And how much it will cost you.

If there’s another property nearby that’s already done the splitter…

Talk to the owner if you can.

Find out how he did it…

Who on the town council guided him through the process…

And what problems he had to overcome and which personalities on the town council were easy to work with…

And which people he had to win over.

This is a big part of your due diligence process…

You need to find out just what your human obstacles are going to be…

And, if possible, how best to overcome them.

You also need to find out who your allies on the council could be…

Then, you need ask for their help with the process…

Because you may well need to have someone in the town council on your side…

Especially if there’s someone on the council who definitely is NOT on your side or otherwise doesn’t want to make it easy for you.

Has it been done before in the area?

Even if a similar subdivision to yours has been done in your area or even on the same street as your property…

That’s a good place to start.

But still, properties on the same street may have different variables to factor in, such a slope of the lot and drainage conditions…

As well as soil compaction and where existing sewer and power lines are located…

Or something as basic as, “Is the septic system able to handle an additional properties?”

Then there’s the location of the property itself.

Is the property next to a busy road or major utilities that will make building another property on the lot dangerous to you or others?

Will it require an access drive that impedes traffic flow?

Environmental costs?

Are there other environmental concerns?

For example, will the fauna or flora in the area be negatively affected?

Do you have to move certain plants or trees?

Is there a habitat issue that you need to address?

Or, will fencing or brick walls need to be moved or constructed?

All of these factors may play a role in the total cost of the approval process…

And the truth is that you won’t be able to account for every cost in your due diligence estimates…

There will always be unforeseen costs and problems.

If the town council is not against your subdivision in principle…

Ask the council for their application guidelines and get specific instructions from them if you can.

Show the council why it’s a great idea

Also, make sure they know exactly what your plans are…

That’s why you will put them in writing when you present your idea to them.

Likewise, get the council’s instructions, objections and other qualifications they require for full approval, in writing.

Also ask for a fee schedule for processing, review and any other costs…

Such as surveying costs and any other services the council may require before they give their approval for you splitter project.

When you do this, be sure to have a building estimate and construction schedule for the new property you plan on building already in hand…

Whether it’s a PPR, a townhouse, a duplex or a block of flats, have solid data on the costs and benefits of them to everyone involved…

Consult three local realtors to provide you complete market valuation estimates on the new property(ies) you propose to build.

Tell the council what tax revenue you new property(ies) will generate and all the ways it will improve the area.

Chances are, your first splitter will be the most difficult…

But it’s also where you’ll learn the most.

That’s why you’ll want to ask your fellow iLoveRealEstate.tv members about their experiences and use their wisdom to your own benefit.