Should you subdivide your property
Subdividing your property can be an outstanding way to turn an unused piece of land into a sizeable chunk of cash. You can subdivide and sell the
land, or subdivide and build a house (or more than one). Then you have the option to sell the new property, rent it out, or move in and sell your old house. All those options are why big sections have a lot of value in Auckland: they’re like a mini retirement fund that you’ve been mowing for all those years.
The first big question when it comes to subdividing is:
Are you allowed to subdivide your property?
You’ll need to consider:
- Whether it’s big enough to subdivide
- The zoning
- Basic infrastructure issues like drainage and access
- Ground stability and potential hazards
- Restrictions on your title
You can find out more about subdividing in Auckland, including your property’s zone, here at the Auckland Council’s subdivision information page.
Once you’ve worked out that yes, you can subdivide, the next questions is:
Is it worth subdividing your property?
Before you start looking at consents and vehicle access and other technical issue, you need to know how much it will cost to subdivide and how much profit you’re likely to make. If the end result is no profit, or a small profit, it’s probably not worth even starting. Subdividing isn’t simple, it’s often stressful, and you’ll usually encounter unexpected costs and problems along the way. For that reason, make your estimates assuming a substantial contingency fund, and then see how the numbers stack up.
Because there are several options for subdividing, you’ll probably need to do a back-of-the envelope feasibility calculation for each one. That will usually rule out one or two straight away, but you need to think carefully about your goal for the project:
- Do you want to get the maximum amount of cash at the end and then walk away?
- Do you want to hold the new build/s for long-term capital gain?
- Do you want ongoing cash-flow into the future?
- Do you want to move into the new build or stay where you are?
- And, of course, how much risk are you willing to take?
No subdivision is risk-free, but by carefully calculating total costs and potential income, you can make an intelligent decision that sets you on track to achieve your financial goals – today and in the future.