Splitter blocks were once a popular option for mom-and-dad investors seeking to make a large profit with little effort. Is it possible to still make good returns five-years later?
Many experienced agents in real estate say that only those who are willing to research the market and then sign the contract can get it signed.
They’re still highly sought after by clients, said Tristan Rowland, a Brisbane-based Place Aspley agent. “The wait lists are huge,” he told the Domain Group. “If I get a listing, it sells within days or the day I list them. You have a look on the internet … they’re all under contract.”
Tristan mentions a Splitterblock located at 85 Fallon Street, Everton Park as an example. The block measuring 1,225 sqm was originally listed on two titles. However, the owner could reposition it to appear on three titles. When it was first listed, investors and developers were very interested in the block.
“I can’t give you an exact sale price as it’s not unconditional yet, but I can tell you it went for over $1 million,” Rowland said. “Considering a standard 405 square block sells for around $400,000 around here, the total re-sale price would be about $1.2 million for the three blocks.”
Though the profits might seem big, he said there’s often too many costs involved in developing the land to make it worthwhile for inexperienced investors.
Profits can be made by redevelopment. “A lot of the guys we have buying these splitter blocks are full-time builders. They build the new contemporary homes themselves – that’s where they make all their money because the demand for brand new contemporary homes is insatiable,” he said.
Anthony Hunt, Coronis Area Manager, stated that it’s now much harder to make money off splitter blocks than it used to be. “The gloss has worn off splitter blocks over the past five years because the costs associated with them are pretty huge,” he said. “It can cost $30,000 to $40,000 to remove the house. Add in all the associated development and services costs and it stacks up very quickly.”
The cost to split an average block depends on each block’s unique circumstances. For a block of 810 square metres, an investor will need to spend between $70,000 and $75,000 to split it into two.
“The biggest component of that is the infrastructure charges ($28,000) and then you have the cost of surveyors, town planners and the actual physical cost of installing the services,” said Scott Entwistle, planning manager at Brisbane-based urban planning firm DTS. “In a best case scenario, this process takes three months but sometimes that can blow out to double or triple that time.”
Entwistle recommended that parents do their research before signing anything. Storm water must not flow to any illegal discharge points. Investors need to ensure this.
Rowland said that wealthy developers were the biggest challenge to investors trying to seize splitter blocks.
“You have to be so quick. Developers have got cash in their pocket and it can be impossible to compete with that,” he said. “There’s still a lot of money to be made … we’re talking $80,000 in a week – but you’ve got to be prepared to move quickly and have your research already done.”