4 ways to subdivide and ramp up your earnings
Subdividing is a great strategy to quickly accelerate the earning potential of your investment portfolio, one property expert has suggested.
This strategy obviously won’t lead to an overnight success, but if done right, you can expect equity gains within a year, Positive Real Estate’s Sam Saggers said.
The CEO and head property strategist said that subdividing property is a great way to boost profits.
“When you divide one property into two or more, you’ve added value to the property simply by registering the new lots.”
Mr Saggers also said that doing so gives you options. You could hold the lots and wait for a good time in the market to sell, develop on the subdivision by adding an additional property or sell one of the properties immediately to reduce debt or gain extra income.
Here are four subdivision options to consider:
1. Strata title
Mr Saggers said that the strategy involves converting a single title into multiple titles.
“Splitting up [the] block of 10 units on one title into 10 separate titles,” the CEO said.
“Aside from increasing the value of your existing properties, strata titles can also give you the liberty to sell each one individually.”
2. Granny flat
A granny flat is one of the most familiar forms of subdivision, according to Mr Saggers.
However, some states prohibit the building of granny flats, so he encourages checking in with the local council before making a final decision.
“Not every state allows for granny flat construction, nor is it suited for every market,” Mr Saggers said.
“This is why it’s important to know the area you’re investing in very well.”
3. Second property
Instead of extending an existing property, this strategy involves splitting the block of land to construct a separate property.
“This simply means splitting a large block of land into two or more lots and then building a new property on the vacant land,” the CEO said.
4. Vacant land
Mr Saggers said that this process requires more involvement (and capital) for the property investor because it alters both the property and the land.
“Developing raw land requires not only a legal splitting of the property but also physically changing the use of the land.”
No matter the type of subdividing you choose to do in order to increase the value of your portfolio, Mr Saggers strongly encourages doing due diligence and seeking the guidance of experts and professionals, where appropriate, for smarter decision making.
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