---
title: "Issue #25: I bought a block to add a second dwelling. Here is every decision so far"
description: Explore my journey in property investment as I navigate the decisions of adding a second dwelling, from planning and costs to title options.
---

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# Issue #25: I bought a block to add a second dwelling. Here is every decision so far

- November 14, 2026

![Alex Zarate](https://www.pbco.com.au/hubfs/profile%20pic.jpeg)

[Alex Zarate](https://www.pbco.com.au/property-notes/author/alex-zarate)

### One title or two, the two ways to subdivide in Victoria, what it costs, how it is funded, and whether to keep both or sell one.

---

On 24 October 2026 I bought a block at auction in Corio, in Geelong's north, to add a second dwelling. Since then nearly everyone I have told has asked the same five questions. Is it one title or two? Does the land get subdivided, and in what order? What does it cost? How is it paid for? And do you keep both, or sell one?

So this edition is a different kind of letter. It is not a framework applied to a made-up investor. It is the live decisions on my own block, shown while some of them are still open. Every dollar figure below is from my own model, provisional, and not a recommendation to anyone. I'm leaving the street address out. Nothing here is advice to you or about you.

This is instalment one. It covers everything decided so far, including the planning path, which I settled this week.

## The block, and why I bought it

The block is 884 m², a wedge: about 13 m wide at the crescent frontage, opening to about 36 m at the rear. On it sits a 1960s brick-veneer three-bedder on concrete stumps, with a double garage at the back reached by a long driveway down one side. That garage sits on what would become the rear lot. A 150 mm sewer main runs along the full rear boundary inside an easement, so nothing can be built over it, walls have to sit at least 600 mm clear and load-bearing footings at least 1.0 m. It was a deceased estate with vacant possession, zoned General Residential Zone schedule 4, no overlays.

The idea: keep the front house, add one dwelling at the rear, end up with two titles.

There was a second scheme on the table. One of the consultancies also costed demolishing the house and building four townhouses across the whole block. I looked at it and left it. It is a bigger build, a bigger loan and a longer stretch with no rent coming in, and for me the extra reward did not cover the extra risk. Keeping a house that already rents and adding one dwelling behind it is the risk and reward profile I wanted.

![](https://www.pbco.com.au/hs-fs/hubfs/image-png-Nov-14-2026-12-14-31-2059-AM.png?width=2000&height=1660&name=image-png-Nov-14-2026-12-14-31-2059-AM.png)

 

We landed on $496,000, just below the published reserve of $499,000.

The building and pest report rated the house below average. Floor levels vary by about 94 mm across the house, against a new-home tolerance of 10 mm per room. There is brick cracking up to 5 mm with earlier brick repairs, perforated garage roof sheets, no smoke alarms, duct-tape repairs on the toilet and a laundry lino that may contain asbestos. There were no termites. Re-levelling was quoted at $3,000 for a rent-compliant fix or $10,000 for a long-term one, and I took the $10,000. The existing-house renovation allowance in my model is $83,500. That is the number the report moved most.

## Decision one: one title or two

Everything else follows from this, so it comes first.

The cheapest way to add a dwelling is to build it and leave the whole thing on one title. A renovated house plus a permitted self-contained one-bed unit sold in the same suburb in June 2026 on 689 m² for $700,000. Renovated single three-bedders sold at $620,000 to $660,000 in July and August. So a second dwelling on one title added about $40,000 to $90,000 to the sale price. The build contract alone in my model is $230,000.

That is the number that frames the whole project. On one title, the market pays a small premium for the extra dwelling. My own reads for the finished product on one title run $690,000 to $730,000.

Two titles are valued differently, as two properties. My model carries $550,000 plus $550,000, so $1,100,000. That is indicative, from two separate appraisals, not a valuation, and it is the number most of the rest of this letter leans on. Own-title small homes in the suburb sold at $450,000 to $592,000, which brackets the $550,000 I carry for each lot.

Three planning facts decide whether two titles are even available.

- **A small second dwelling can never be split off.** A dwelling of 80 m² or less on the same lot as a house (the cap rose to 80 m² in October 2026) is a "small second dwelling", and the planning rules say a permit cannot be granted to create a separate lot for land containing one (Clause 32.08-3). My rear dwelling has to be a conventional dwelling, not one of these.
- **Garden area.** At 884 m² the zone's garden-area scale (Clause 32.08-4) requires 35%, about 309 m², and this schedule does not exempt a new dwelling from it.
- **No minimum lot size.** Neither Clause 32.08 nor its schedule 4 sets one. The risk is local policy: Clause 16.01-1L-02 in Greater Geelong, which applies around Corio Village, says to "discourage the fragmentation of sites", and the schedule imports that policy as a decision guideline. That is discretionary, and it is the main planning risk to two lots.

## Decision two: the two ways to subdivide in Victoria, on this block

I collected three offers from three consultancies. They are not like-for-like quotes. Each prices a different order of operations, and the order is the point.

**Build first.** Get a planning permit for the rear dwelling, then a subdivision permit, then build, then certify the titles after construction on as-built plans. Subdividing "into lots each containing an existing dwelling" is exempt from the Clause 56 subdivision standards (Clause 32.08-3). Titles arrive after the build. In my model that is December 2027.

**Subdivide first.** Subdivide the bare land into two lots, assessed against four Clause 56 standards (lot area and building envelopes, common area, lot access and stormwater), service the vacant lot before the statement of compliance, and get both titles before anything is built. The rear dwelling then goes up later under a building permit, from a volume builder's standard plan.

Both approvals are fast-track classes in the current scheme. A dwelling beside an existing one is VicSmart where the lot ends up with four dwellings or fewer and the listed Clause 55 standards are met (Clause 32.08-7, as amended in October 2026). A two-lot subdivision that creates a vacant lot is VicSmart too (Clause 59.11), provided the land is not in a designated bushfire-prone area, which I have not yet checked for this block.

![](https://www.pbco.com.au/hs-fs/hubfs/image-png-Nov-14-2026-12-15-04-9162-AM.png?width=2000&height=1450&name=image-png-Nov-14-2026-12-15-04-9162-AM.png)

The three offers, anonymised:

| Path | Who | Fee | Added on top | Titles |
| --- | --- | --- | --- | --- |
| Build first | A subdivision-specialist planning consultancy | $8,000 inc GST, fixed, unlimited council requests | About $8,200 third party, about $6,000 for titles, $5,000 to $7,000 building-permit documents: about $22,000 planning-to-titles | After construction |
| Build first, bespoke design | A planning-and-design practice | $13,100 + GST (about $14,410) | Third-party reports, council fees, about $6,000 titles: about $28,000 | After construction |
| Subdivide first | A licensed surveying practice | $14,050 + GST (about $15,455) plus disbursements | Council and authority fees, stormwater plan, servicing works brought forward | Before any build |

The fee on the third row buys six pieces of work: a re-establishment survey, a re-plan, a feature survey with the subdivision plans, the planning report, certification of the plan, and help with the statement of compliance.

### Why subdividing first suits a volume builder

A volume builder wants a clean lot and a standard plan. Subdividing first gives them one: no bespoke planning drawings, no design fee at the planning stage, and the builder stays open until the titles exist. A vacant lot is also saleable on its own, so there is a fallback if the numbers change. The build-first path has to design the dwelling to get the planning permit, which is where the $8,500 (ex GST) design fee on the middle offer comes from.

### What I chose, and why

This week I settled it: build first, with the subdivision specialist, and the subdivision run alongside the build rather than ahead of it. The dwelling permit goes in first, the subdivision permit follows as soon as it is granted, and the plan is certified on as-built drawings while the house is going up.

The reason is finance, not planning. Subdividing first pays for the servicing works, the shared driveway and the crossover before a title exists and before there is a building contract, so that spend comes out of cash. Building first puts most of that work inside the building contract and the construction envelope, which is how I am assuming the construction facility would treat it, progress draw by progress draw. In my model the eligible works are $403,275: the construction line, the contingency and the subdivision line together. On a subdivide-first run a good part of that subdivision line would have sat in front of the facility, out of my own pocket, in a project that already has a cash gap. Whether the lender treats the works that way is a question for the lender, not an answer I have.

What I gave up is the clean-lot argument. The dwelling has to be designed for the planning permit, so the volume builder's standard plan gets adapted rather than used as it is, and there is no vacant lot to sell if the numbers change. In exchange, the rear lot is created under a permit for development, so the 25% garden-area condition on a vacant lot under 400 m² does not arise (Clause 32.08-3), and the dwelling application is a VicSmart class. That is the trade: a design fee and a few weeks of drawing, for more of the project inside the facility.

### What it brings forward

Subdividing first is not free of cost, it just moves the cost earlier.

- **Servicing works.** Water tapping, sewer branch, power pit, stormwater to the legal point of discharge, and a shared driveway and crossover all have to be done before the statement of compliance. My research bounds this at roughly $15,000 to $40,000, with real gaps: no Victorian contractor prices exist for the physical runs of water, sewer and power.
- **A stricter test on the vacant lot.** A vacant lot under 400 m² must keep 25% as garden area unless it is created under a permit for development (Clause 32.08-3). Lots between 300 and 500 m² are expected to have a building envelope, either one matching an approved development or one that can hold a 10 m by 15 m rectangle (Clause 56.04-2).
- **The lender.** The acquisition lender has to consent to splitting its security.

Two rules from my own block's geometry apply on either path. The frontage is about 13 m, and the Clause 55 access standard (B2-6) caps the accessway at 40% of a frontage under 20 m, so one shared crossing of at most 5.2 m. Two crossovers are not available. The water authority's servicing rule says both lots must be at or under 500 m², or the servicing becomes a developer-works job with a consulting engineer and management fees. An 884 m² block split about 450 and 434 m² clears both.

### The steps, in order

On either path, the road to a new title runs through the same five steps. What changes is where the build sits among them.

1. **Planning permit.** Council grants permission to subdivide (Clause 32.08-3).
2. **Certification of the plan.** The plan of subdivision goes to council for certification, and council must certify it once every referral authority, the water and power authorities among them, has consented and any alterations they require are made (Subdivision Act 1988, ss 5 and 6).
3. **Servicing works and permit conditions.** Whatever the authorities and the permit require is built and inspected.
4. **Statement of compliance.** Council issues it once it is satisfied the public-works requirements have been met (s 21).
5. **Lodgement for registration.** The certified plan goes to the Office of Titles and the new titles are issued (s 5(3)(e)).

One more rule sits in the Act. Where the planning scheme itself sets no open-space requirement, a council can ask for up to 5% of the land, or its value, as public open space, but not on a two-lot subdivision where it considers each lot unlikely to be subdivided again (s 18). The subdivision specialist's offer says there is no open-space contribution for one dwelling at the rear; the other two are silent on it. I have not yet confirmed any of that against the Greater Geelong scheme's own open-space schedule.

## What it costs, all in

This is the stack from my model, GST-inclusive as the model treats it. It was built as a build-first model, which is now the path, so it stands as the base case:

| Stage | $ |
| --- | --- |
| Acquisition all-in (price, stamp duty, conveyancing, searches, adjustments) | 526,564 |
| Planning and development approval | 24,400 |
| Building approval and drawings | 15,000 |
| Construction and renovation | 361,500 |
| Construction contingency (5%) | 18,075 |
| Subdivision and titles | 23,700 |
| Holding costs (12 months) | 10,800 |
| Finance fees | 15,562 |
| **Total project spend, before interest** | **995,601** |

Interest on top is $127,714 over 36 months, at an assumed 7.5% interest-only on drawn debt.

![](https://www.pbco.com.au/hs-fs/hubfs/image-png-Nov-14-2026-12-15-30-4019-AM.png?width=2000&height=1626&name=image-png-Nov-14-2026-12-15-30-4019-AM.png)

 

Two lines need more than a number. The construction line looks like a new-dwelling number, but $83,500 of the $361,500 is the existing house's renovation, about 23%. A good part of what I'm spending is catching the old house up, not building the new one. And in the subdivision line, development contributions of $5,000 and infrastructure charges of $8,000 are provisional. I have not seen a council or authority figure for either.

## How it is funded

The structure in the model:

- An acquisition loan of $353,000.
- $141,000 of cash at settlement, plus a further $100,000 of cash allocated to the works, so $241,000 of my own money pledged.
- A construction facility of $303,275, which is the $403,275 of eligible works less that $100,000 of cash.
- Total planned debt: $656,275.

The lender test I'm working to is 70% of the as-if-complete combined value. On $1,100,000 that is a $770,000 ceiling. Planned debt is $656,275, so 59.7%, which leaves $113,725 of headroom.

A valuation clears one gate. The rent, together with the rest of your income, has to clear a second. Here is that second gate on my own numbers. At 70%, the rent-side cash flow is a loss of $24,549 a year. So the $113,725 is a ceiling, not money. Nobody has approved a cash-out, and the rent does not carry it.

Not everything is funded yet. The loan and the $141,000 together fall $32,564 short of the all-in acquisition line, before a dollar of works. Project cost less stated funding leaves $98,326 unfunded. The cash gap at the intended title date, December 2027, is $119,432. Over 36 months the peak extra cash I'd need, beyond the $241,000, is $148,802, and that figure includes the rental deficit after titles. I'd rather print that number than hide it.

Two things only the lender can answer: which of these costs count as eligible construction finance, and whether they accept a valuation before the titles exist. The first is the whole reason I chose the path I did, so it is the first question I take to them. The model's 70% test assumes a lender will accept a combined as-if-complete value. I haven't been told that either.

## Keep both, or sell one

Once there are two titles, there are three things that can happen next. The model runs all three on 7.5% interest-only, from the same starting position.

|  | Hold both | Sell the new one | Sell the existing one |
| --- | --- | --- | --- |
| Gross sale | none | 550,000 | 550,000 |
| GST reserved on the new dwelling | none | 50,000 | none |
| Selling and legal costs | none | 15,100 | 15,100 |
| Net proceeds | none | 484,900 | 534,900 |
| Debt after sale | 656,275 | 171,375 | 121,375 |
| Equity after sale | 443,725 | 378,625 | 428,625 |
| Weekly rent kept | $975 | $475 | $500 |
| Annual cash flow after interest | -$16,020 (-$308 a week) | +$3,160 | +$8,084 |
| Loan-to-value | 59.7% | 31.2% | 22.1% |

![](https://www.pbco.com.au/hs-fs/hubfs/image-png-Nov-14-2026-12-16-16-1485-AM.png?width=2000&height=1294&name=image-png-Nov-14-2026-12-16-16-1485-AM.png)

Read across the columns and one fact stands out. Holding both keeps the most equity, $443,725, and the most rent, and it costs me $16,020 a year out of my own pocket. Selling either one takes the debt from $656,275 to a fraction of that and turns the cash flow positive, and it costs between $15,000 and $65,000 of equity compared to holding. Selling the existing house gives up $50,000 less equity than selling the new dwelling, mainly because the model reserves $50,000 for GST on the new one.

I'd treat that GST figure with suspicion. The $50,000 may be too high if the margin scheme applies, and the model includes no capital gains or income tax at all. Both belong with an accountant, not with me. The tax-reform timing matters here too. The house was contracted after 12 May 2026, so it sits on the established side of the rental-loss quarantine from 2027-28 (s 26-155). Whether the rear dwelling counts as a "new residential dwelling" depends on a ministerial definition that hasn't been made yet. And from 1 July 2027 the 50% capital gains discount is gone on established residential property, which bears directly on the sell-the-existing-one column. I can't price any of that in. The −$16,020 is before all of it.

The lender also decides how much of a sale proceeds must repay debt. A model assumption is not a lender's instruction.

## What I decided this week, and what is still open

The planning path is decided: build first, subdivision alongside. The model was built that way, so the numbers above stand as the base case, and the subdivide-first run that was never built no longer needs to be.

Four checks are still open, and they come before any engagement is signed:

1. **The construction facility.** Which of the works count as eligible construction finance, and does the facility fund the servicing works, the driveway and the crossover as progress draws? The whole reason for the path rests on that answer. The lender also has to consent to subdividing its security when the plan is certified.
2. **Lot geometry.** Both lots at or under 500 m² to stay out of developer works with the water authority, and the shared driveway's share of the land settled before the plan is drawn.
3. **The shared driveway.** One shared crossing means the driveway is either common property, which makes an owners corporation mandatory (Subdivision Act s 27A), or an easement over the front lot, which does not. I need to know which, and what it does to the titles and to the servicing diagrams.
4. **The design brief.** The volume builder's plan has to be adapted for the planning permit, and the builder can price it before lodgement. What that adaptation changes, and what it adds to the $230,000 build contract, is the number I don't have.

One thing I gave up deserves saying plainly. In this zone a permit to build one dwelling is required only on a lot under 300 m² (Clause 32.08-5), the schedule adds no trigger and the block has no overlays. I had this checked against the scheme text this week. On a subdivide-first plan a 434 m² rear lot would have gone straight to a building permit, with no planning application under the zone. That was the strongest argument for the other path, and the finance argument beat it.

The clock has changed too. The surveying path's pre-Christmas lodgement is no longer the deadline. The build-first application takes four to six weeks to prepare, a VicSmart decision comes about two to three weeks after lodgement, and the planning application can be lodged before settlement with the vendor's written consent. That consent is the next thing I ask for.

## A note from me

I've written about equity, gearing and servicing for a while, usually from the outside. It's different with your own money in it. The model is clean until a lender says "it depends". The honest summary of where I am: I have a model with an unfunded gap of about $98,000, a planning path chosen, and a lender still to answer the question that path depends on. I'll show you how it goes, including the parts that don't work.

See you next week. — Alex

**Coming next:** the dwelling design, the planning lodgement, and the lender's answer on what the construction facility will fund.

---

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---

This is general information and not financial advice. Results are hypothetical and depend on the assumptions you enter. The figures in this edition are the author's own project assumptions at 13 November 2026 and will change.

This article is for educational purposes only. It does not constitute financial, legal, or tax advice. Everyone's circumstances are different. Please seek professional advice before acting on any of the strategies outlined above.

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[Strategy](https://www.pbco.com.au/property-notes/tag/strategy), [Retirement](https://www.pbco.com.au/property-notes/tag/retirement), [Planning](https://www.pbco.com.au/property-notes/tag/planning)

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