Subdividing is the process of dividing a piece of land into two or more pieces. This can be done for a variety of reasons, such as creating multiple residential lots from one large parcel or splitting a large piece of land into smaller parcels that can be sold individually.
When it comes to dividing up a piece of land, there are a few things property owners should consider before making a commitment. Subdividing can be complex with significant up-front costs. However, it can also allow for a greater return on your investment if done well.
By understanding the benefits and drawbacks of subdivision and working with an experienced dual occupancy builder, you’ll be able to make an informed decision about whether this is the right step for you.
Pros of Subdividing
- Higher Profits
If you do decide to sell your subdivided property, you are likely to see a higher profit than if you sold the property as one larger parcel. This is because buyers are typically willing to pay more for multiple lots than they would for one large piece of property.
This can be a particularly effective strategy in areas with high land values and strong demand for housing. By dividing a large lot into multiple smaller ones, developers can maximise their profits while still providing buyers with the homes they desire.
In addition, subdivision can also help to create a more cohesive community by increasing the number of neighbours and fostering a sense of connection between them. A good, reputable community may, in turn, increase the desirability of your property.
When done correctly, subdivision can be a win-win for both developers and homeowners.
- Increased Equity
By breaking up a larger property, you can create multiple smaller properties that are each worth more than the original piece of land. This can be a great way to increase your equity, especially if you plan on selling in the future.
In addition, not only does this provide potential buyers with more options, but it also allows them to purchase a property that fits their budget.
There are, however, a few things to keep in mind when subdividing. You need to make sure that the new parcels are of a reasonable size and that each property has access to utilities. That being said, when done properly, a subdivision can be an effective way to make homeownership more attainable for everyone.
- Can Boost Cash Flow
Subdividing creates additional income streams and boosts your cash flow. By renting out the multiple new units, you can offset the costs of carrying the property and generate a healthy return on investment.
This extra money can be used for a variety of purposes, such as investing in other properties or taking care of repairs and renovations.
Cons of Subdividing
- Unexpected Costs and Time Delays
A potential downside of subdividing property is that there can be unexpected obstacles. Subdivision is a complicated process that can often lead to delays and cost increases.
For example, subdividing a parcel of land into multiple lots can require the approval of multiple government agencies. The process can also be slow if the land is being subdivided for the first time, as surveys and other paperwork need to be completed. In addition, subdividing land can sometimes lead to disagreements between neighbours, which can further delay the process.
In some cases, you may need to hire a lawyer or surveyor to help with the process, which can add to the overall cost.
- Can Reduce Value
If you’re not careful, subdividing a piece of property can actually reduce the overall value. This is typically the case when the subdivision process is not done correctly or when there are too many individual lots created.
Also, subdividing increases the amount of buildable land on the market, which can lead to lower prices for land overall. Second, it can create confusion and uncertainty about zoning regulations and property lines, making it difficult for potential buyers to assess the true value of the property.
Finally, subdivisions often need to be serviced by new roads and infrastructure, which can be costly and difficult to obtain approval for.
For all these reasons, subdivision can end up reducing the value of a property rather than increasing it.
We hope that this has helped you gain a better understanding of property subdivision. By knowing the pitfalls and benefits of the subdividing process, you will be able to make educated financial decisions regarding your property.