Diary of a property investor: Adrian Stagg

Diary of a property investor: Adrian Stagg
Diary of a property investor: Adrian Stagg

A few years back I was approached by an agent to buy a vacant lot which he thought might have been ripe for one into two lot subdivision. It had an extra wide frontage and, as he enthusiastically pointed out, it even had two street numbers, which immediately pricked my interest. In fact, on inspection I noticed that all the neighbouring properties were of similar size and I immediately wondered why they had not already been subdivided.

The answer soon became clear. They were not sewered. To subdivide one would need to provide sewer, the closest connection point of which was several hundred metres away and therefore not feasible for just two lots. The land on offer had a large Greenfield site to the rear which I had heard rumours about being developed into a large housing estate.

I visited the local council just to verify my thoughts and whilst there enquired as to what exactly was happening with the Greenfield site. To my surprise I learned that the subdivision had just recently been approved and that one of the conditions of approval was that they provide a sewer connection to the adjacent unsewered lots including the one I had been offered. This was a game changer!

In addition to putting a contract on the lot in question I also approached all the owners of the other unsewered lots that had suitably positioned homes to enable subdivision and managed to buy another two including the one next door to the first lot.

Now this is where it gets even more interesting. On checking the densities set down in the town plan I noticed that each lot had a Plot ratio of 2.2 lots, meaning that together the two adjacent lots had a combined allowance of 4.4 lots.

The Queensland state government through it’s Department of Local Government has ultimate say over planning matters and actively encourages local councils where possible to allow development which uses existing infrastructure more efficiently. I wondered if this would enable me to turn our two lots into five?

There was another advantage in going for five lots because the second property acquired had a highset timber house on it which would likely need to be moved sideways or removed if four new evenly spaced lots were created whereas it fitted in just nicely in a five lot scheme.

Along with some joint venture partners we chanced our arm and succeeded in getting four new vacant lots and one other with the existing home remaining which was renovated to be sympathetic with the four new homes that we built there.

This turned out to be quite a profitable project. Two of the four joint venture partners including myself elected to sell straight away and those two homes were sold immediately at asking price. Tax liability could be dispersed because we were structured suitably. The other two partners each kept a new home for letting and to hold for the mandatory 12 months period until they at least qualified for the 50% capital gains tax rebate.

Sadly the market conditions deteriorated somewhat as has their likely selling price. Fortunately for them though they are still in a very profitable position due to the manner in which they acquired the properties in the first place. Had they bought the homes at ‘market price’ at the time they would still be playing catch up.

Adrian Stagg is a director of Embark Intelligent Property Investment and has been actively involved in the property industry since the 1970’s.

You can connect with Adrian via LinkedIn.

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