What are the benefits of subdividing?

What are the benefits of subdividing?
February 7, 2022

Real estate is one of the most accessible, dependable, and efficient avenues for Kiwis to invest and generate wealth. Almost everyone, from first-time investors to seasoned professionals, can invest in real estate, and the potential for a significant return on investment is genuine.

Of course, there are other strategies you can use while investing in real estate. The path you take may be determined by factors ranging from the type of property you own to your personal preferences. Property subdivision is an option that some individuals can pick.

Land subdividing, or the process of dividing a single lot into two or more smaller pieces, can be a lucrative venture for investors. To that end, we've put together a guide that covers some tips that real estate investors need to know about this process. In this article, we'll go over the advantages of subdividing land, as well as the procedures you'll need to do to make it happen and advice for getting the greatest outcomes.

Do your research

When it comes to property development, there is usually a stringent legal process that must be followed. As previously stated, these processes are typically governed at the county or municipal level. So, before you begin dividing up the land, you should visit with someone from your local planning and zoning office to discuss the subdivision potential of your lot.

Subdivision regulations often stipulate the maximum size of each lot, the sort of street access required for each one, and the criteria for necessary access to services such as water and electricity. In addition, you should review your individual deed to see whether there are any limitations on the number of times your own lot can be subdivided.

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Smaller lots are often more marketable

To begin with, smaller plots of land are frequently more marketable than large, unwieldy lots. For starters, they have lower price points, making them more affordable to a wider range of buyers. Selling a large plot of land frequently entails marketing to a speciality buyer who desires a large amount of acreage. Smaller, more average-sized lots, on the other hand, are more likely to appeal to the masses, increasing your pool of prospective buyers and your ultimate chances of receiving an offer.

Greater Flexibility

Of course, you have the option of keeping some of your land for rental income. Subdividing can provide you with the best of both worlds, allowing you to sell one property for a quick profit while keeping the other for ongoing cash flow. Selling one of the properties can provide you with the funds to expand on the other.

Potential for profit

Subdivision takes one property and turns it into two or more, meaning you have more assets to sell. On a large enough block in a desirable area, this could be a highly lucrative move. Simply subdivide the land, develop each property, and sell them all off.

Depending on market conditions, land division can be an efficient way to increase the value of a property. In some cases, two or more smaller lots may sell for more money than one big parcel. That said, if this is your goal, it may be a good idea to talk to an appraiser before you start the subdivision process. He or she will be able to estimate the value of the subdivided land versus the value of keeping the lot as-is

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Undergo the necessary engineering planning

Once your preliminary plan has been approved, you can begin working with an engineer. The engineer will be required to draw plans for any construction work that you intend to do on the lots at this time. This could include anything from rearranging drainage patterns to installing utilities on new lots.

Your engineer will also be required to create a set of drawings that must be approved by the planning board. They may, once again, request adjustments to the plans before granting subdivision consent and ultimate approval. Overall, the clearance process might take months to complete, so make sure you give enough time to go through it.

Whether you're looking to build a new home on a current property, or you're considering building investment properties to rent or sell, our subdivision specialists are here to help you every step of the way.