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Subdividing for Home and Income

Posted 4th June 2020

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There’s never been a better time to consider subdividing your property for extra income. Whether you’re looking to subdivide and sell one property, subdivide and rent one property, or subdivide further and earn income from multiple properties, the options are almost endless.

Subdividing can be a great way to clear your own debt or simply set yourself up with long-term income for the future. But is it as easy as it sounds? Well, there are still approvals you need, assessments on what’s realistic and of course the cost. But now is perhaps the best time to make some enquiries about subdividing your property.

Thanks to the recent changes to the Auckland Unitary Plan, it’s easier than ever to make subdividing a reality. So, let’s take a look at what’s involved, and how you can benefit from subdividing your property.

 

What is the Auckland Unitary Plan?

Firstly, let’s explain the Auckland Unitary Plan. Obviously, this only applies to Auckland residents, and as we know, subdividing is possible throughout New Zealand. We’ve chosen to focus on Auckland here though, as subdividing is easier than ever.

In short, the Auckland Unitary Plan has been amended to make building on your land a lot easier. Density restrictions, height restrictions and even parking requirements have been relaxed. The idea behind it is creating a more compact Auckland, meaning building multiple dwellings on your property is now a bit easier.

That’s not to say you can go ahead and build whatever you want without approval, but some of the previous restrictions have been relaxed, making it easier to get approval for your subdividing plans.

 

Why Should You Subdivide?

There are multiple reasons people may consider subdividing. While mostly financial, there are lifestyle reasons too. The fact is, many homes are built on quite large properties. As a society, we also don’t necessarily have the desire to maintain large garden areas and backyards like we used to. As such, you can effectively split your property in two, and have two dwellings instead of one.

This creates income opportunities, and also reduces the area you need to look after. You’ll obviously lose some space, so if having a large yard and space around your home is important, subdividing probably won’t be for you. However, if you own an investment property, you should certainly consider whether subdividing could provide you better long-term returns.

 

Decreasing Your Debt Quickly

One of the best reasons to subdivide is to decrease your own debt. Most people have mortgages to pay, and it’s reasonable to think they want them paid as quickly as possible. It’s not just the feeling of freedom you get, but by paying a mortgage off early, you can save yourself thousands of dollars in interest.

That’s why subdividing might make sense for you. For example, you could split your property in half, and build a second dwelling. You could take two options – rent the property out and use the payments as an extra mortgage contribution, or even sell the second property and pay a lump sum off your mortgage. Provided you can sell the home for more than it costs to subdivide, you’ll be able to decrease your debt significantly.

 

Subdivide and Build Wealth

Much like the example above, you may choose to keep your second dwelling as a rental property. That gives you ongoing income for years into the future. As we’ll touch on in the next section, you don’t just need to think in terms of splitting a property in half. If your land is big enough, you may choose to build two more properties. You could even demolish the existing home and build 4 smaller ones.

Creative options like this can give you the best of both worlds. You may be able to sell one, and rent the other for example. This way you get an immediate lump sum towards your mortgage, and ongoing rental payments too.

 

Subdividing Options

Your subdividing options are really only limited by land size, your budget, and of course council approvals. There are three common options on a reasonable sized block of land:

  • Build one additional dwelling to either sell or rent out
  • Build two additional smaller dwellings to sell or rent out, or a combination
  • Demolish the existing property and build 2-4 new homes to sell or rent out

Naturally, the cost of building these new home designs goes onto your existing mortgage. So, if you’re building 2 or more homes and only selling one, you need to understand the financial implications. While the sale of one property will be a lump sum paid off your total owed, you’ll still likely owe more than when you subdivided (because you’ve paid to build 2 or more homes). The difference is, you’ll be getting rent from the other properties, which can go directly against your mortgage.

 

How to Get Started

If you want to consider your subdividing options in Auckland or anywhere else in New Zealand, contact the team at Stonewood Homes today. We can discuss your options and guide you through every step of the process. There are usually costs involved in performing feasibility studies for subdividing, and our costs are always transparent. Please contact our friendly team today, because we’d love to help you explore subdividing for wealth.

Posted By
Stonewood Homes