Sub-division is the practice of dividing land into pieces that are easier to sell or develop. It is a means of adding value to your land or property. When you divide a plot of land into two or more you have effectively multiplied the value of your property without having to buy another land. Sub-division is,in a sense,a way of doubling the number of your property or buying an extra land at wholesale.
If you decide to sell the extra land, it will become an extra income.
Sub-division can be done on raw land. Sub-division can be done on a developed property.
Raw land is often easier to sub-divide depending on the size. Raw land could be sub-divided into two or more plots that could then be sold to a single investor or several purchasers who are at liberty to determine what they will do on the property.
In some other instances, a developed property could be sub-divided through redevelopment.
There are many things to consider before you can participate in this method of multiplying the value of land or making money in real estate.
The size and location are very critical in sub-division. A regular plot of land is between 550 to 650 square meters. Depending on what you intend to do with the land, a land size of 900 to 1200 square meters could be sub-divided into three. The location of the land could determine its accessibility and viability. This is one of the reasons why most real estate investors prefer corner plots because of their size and the fact that they provide flexibility in design so that the architect can make provision for multiple access.This has the potential to increase the value of the development.
As part of your due process you should find out if the area is zoned for residential, commercial or mixed development. This is important in determining what type of development the government will approve.
One of the initial due diligence that you should do is to observe as you drive around the neighbourhood what is being done on other properties. While this should not be the only research that you should do, it could help you identify a trend in the neighbourhood. It could help with your analysis of the demand and supply dynamics. Are there several properties that are developed on sub-divided land? Are they staying long on the market before getting sold or has the demand outstripped supply?
It is essential to carefully explore the best use of the land or property. As part of your team you need a good architect that could help you maximize the value of the land through appropriate use of space. Remember, the design will impact on the cost and perhaps the possibility of obtaining development approval from the government.
The management of cost is critical to making a profit or otherwise through sub-division. You need money to develop the property and other associated costs. Engaging a draftsman who is experienced with local regulations at the early stage of the property development could help save cost and time.
Sometimes a property owner might be more interested in a use of land that gives them the most profit with as little cost as possible. In some instances where the property owner has enough space at the back of the property they can live in their property while they build another property on the remaining parcel of land. They can decide to retain the property and rent it out in order to generate additional income. However,if the property was wrongly positioned on the land or it had become dilapidated they might decide to demolish it entirely ,sub-divide it and maximize the value of the land.
The topology of the land could be an advantage or a disadvantage.If a parcel of land is not a corner plot but is relatively big and faces two streets this will be an advantage.
The allocation of appropriate space is essential for making room for things like drive-way,parking space and mini gardens.In some areas there is a minimum square meters that is expected depending on the intended use of the property. If you are economical with space and your competitors are generally generous with space, your property might not sell quickly after development.