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  1. #1

    Default To Subdivide and Sell; or Subdivide and Build and Rent out?

    Hey Everyone

    Would appreciate some thoughts on this one.

    Have just had an offer accepted on a property in good location in Blenheim for $230K. Property is an older 2 bdrm home on 870sqm.
    Current rents received $210 - $230 p/week. Looking to subdivide back area down to 400sqm.

    Should I:

    A/ Subdivide and sell back section off as land only. Subdivision cost approx $25K, estimate sell price based on local figures $90 - $100K.


    B/ Subdivide and build 3 bdrm townhouse then rent out. Subdivision cost approx $25K, plus building cost approx. $120K. Could rent out for approx $250 p/week.

    Any advice or further ideas/ options would be greatly appreciated.

  2. #2
    Join Date
    Jan 2004


    It sounds like you could build and sell for far greater profit then just subdividing and selling. I'd also guess that the rental on the new property wouldn't be that great compared to it's market value. I'd build and sell.

  3. #3
    Join Date
    Jun 2005


    It is best to do the numbers I think.

    (Rent * 52) / (total costs - total income)

    If you do nothing, then (220*52)/230000 = 5%

    If you subdivide and sell then (220*52) / (230000+25000-95000)=7.1%

    If you subdivide, build and sell then (220*52)/(230000+25000+120000-180000)=5.9% (this is assuming you sell the new house for $180K - I have no idea of prices in Blenheim).

    If you subdivide, build and rent then ((220+250) * 52) / (230000+25000+120000) = 6.5%

    This all assumes you are renting the first property for $220 a week, before and after subdividing.

    I suppose it depends on how interested you are in doing the building yourself or letting someone else do it. Also if you build and sell, then you become a developer in the eyes of the IRD.

  4. #4
    Join Date
    Mar 2005


    Hi we have just done what you are doing. Bought a place for $126,000 subdivided the back section off which is worth $65,000.
    We are going to build and rent, as the rent covers the front house, so essentially we have the section for free.
    The other option you could do, is sell the front house and build on the back and then rent out the new one.
    Again you just have to do the sums, and I agree, work out what it you want to do long term do you want a rental, or do you want a cash injection now?

  5. #5


    Any scope for building on the back section mabey a cheapish 3 bedroom dwelling and not subdividing??
    save the cost until equity is built up. With the possibility of subdividing in the future. If of course this is possible though the council.


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