For an investor who owns land and property, there is always an opportunity to extract more value from your investment. In the case of small parcels, that might mean a focus on redeveloping or renovating existing properties. For a larger lot, subdividing and creating additional housing may be the right way to proceed. It can be tempting to think about doubling or tripling your opportunities for income, but subdividing is not an easy process. Here are pros and cons to consider.
Real estate investments are all about long-term yield. With more opportunities to rent freshly-built properties, there are more chances to create wealth. The subdivided units may appreciate over time, eventually allowing you to sell and move on to greater investments. The potential for growth is high.
A subdivision doesn’t happen overnight. There are many administrative factors to consider, such as paperwork, proper zoning permissions, and much more. These steps can complicate the process and lead to a much longer period before you can commence with subdividing. Don’t start this effort unless you’re willing to deal with the red tape.
When all is said and done, you’ll be left with a way to generate more revenue with the same amount of property as you had before. That’s often a net positive for your investment, especially with careful financial planning. For the savvy investor in the right market conditions, it can be an excellent fiscal move.
Unfortunately, you must spend money to make money. Licensing, zoning, and preparing for subdivision can rack up big bills. That’s not to mention the construction costs if you plan to subdivide and build. Consider your options carefully, weigh these pros and cons, and determine if it is the right choice for your investment strategy.