Does subdividing create more equity

[Guest]

Hi guys,

I have just got a query around sub dividing. I have a property in Rotorua that has 2 houses on it:
- 1 a 3 bedroom with a sleepout
- 2 is a 1 bedroom with a garage.

If I was to go through the process of subdividing it all, would I end up with more equity or is it better off leaving it as is, with 2 property's on the 1 title.

Thanks

[Shane D]

Daniel,

I don't know about council charges in Roturua for subdiviiding but here in Auckland, sub-dividing makes little sense right now unless the property is in an expensive area. In Auckland, the council will charge you around $100,000 all up.

Maybe Roturua council is better. Go in the council and chat with them about overall costs.

Shane

[LCS]

$100,000 in council fees sounds high even by Auckland standards, I imagine that amount includes development contributions which shouldn't apply in this case given that the building has already been done.

A local surveyor could probably give you a better idea of overall subdivision costs. I would possibly also talk to a decent real estate agent or valuer who could give you an idea of what the property would be worth split in two.

[NovInvestor]

With the spare money, why not just buy a place next door for 10-20% under market value (or after reno value)??

Instant equity

[Guest]

I guess I'll track down a real estate agent or surveyor and have a word with them. Would only be looking at doing it if I would end up with more equity at the end of the day. I'm guessing though by the time you pay the council and surveyor any extra equity would be eating up in costs.

[Shane D]

$100,000 in council fees sounds high even by Auckland standards, I imagine that amount includes development contributions which shouldn't apply in this case given that the building has already been done.

A local surveyor could probably give you a better idea of overall subdivision costs. I would possibly also talk to a decent real estate agent or valuer who could give you an idea of what the property would be worth split in two.

LCS,

You are correct. $100,000 was starting from scratch with all council costs included.

[Shane D]

With the spare money, why not just buy a place next door for 10-20% under market value (or after reno value)??

Instant equity

Yes there are better ways to use an investor's money right now than sub dividing. The process is just too long, which ties up your money with no return.

As NovInvestor suggests, better to put your money into buying another property and start earning as soon as the deal is done.

Shane

[Chrissina]

We looked into it about 3-4 years ago with our Rotorua property, and even had a surveyor come to the property. For us, it was definately not worth it - we did have to move a garage (big solid brick one adjoined to the house) though which didn't help with the figures.

[Shalodge]

If it is a 'complying' subdivision then costs are reasonably small (eg $5k). The problem is that it is unlikely that it is (side yard, coverage, light plan and other rules) or it would have already been done.

Russell

[Guest]

I guess at the end of the day it is better to leave things as there are and then buy another investment property with they money that would have been used to sub divide. I guess I was more thinking if it would give me better value to sub divide, sell the two properties buy another investment property and use any extra money to put towards my own mortgage.

[BigRedDog]

Nah a friend just did that.
Not worth it.

Too expensive and time consuming plus they mentioned they might be making a LOSS depending on what one of the properties sell for.

[NovInvestor]

As Ron Hoy Fong said to his students:

" Just buy the place next door "