Subdivision of land involves splitting the land into different plots and selling the parts individually. Subdividing land typically results in a higher profit. Some landowners divide their land to earn a profit from it or distribute it among family members.
Real estate investors sometimes also suggest the subdivision of lands to add more value to the land. Splitting up your land can be used to your advantage if done correctly. However, it can sometimes become a hassle if it does not turn out as you wanted it to due to mismanagement.
To ensure you avoid the difficulties that can arise in subdividing land, we will discuss the various factors you need to consider before deciding if that is the right move for you. We will begin the discussion by giving you an insight into why you should do it and how it works, and the pros and cons involved.
Why Should You Decide to Subdivide Land
Another huge reason behind subdividing a piece of land is to divide a large tract into building lots. Apart from these mainstream reasons, some other factors may help convince you to subdivide your land. Some popular reasons that people decide to subdivide their land include:
To Increase the Overall Value of the Property
Many factors will need to be considered when deciding if your land would be worth more subdivided into smaller plots. Crucial considerations will include:
- The location of the land
- The zoning where the land is located
- How big is the original plot of land
- The current market for small vs. smaller plots
The overall goal is for the revenue from the divided land to be significantly greater than if you sold the entire piece of land as a whole.
Dividing One or More Sections to Generate Rental Income
An outstanding feature that a subdivision of your land can give you is retaining some of the land for yourself. Subdividing part of your land to generate rental income, while you retain the use and enjoyment of the rest of the property is often beneficial. The cash generated from rentals might cover debts, generate income, or pay your property taxes.
Another aspect that sellers tend to explore while opting to keep some land to themselves is that they wait till the market prices rise and sell the left behind portions at better rates. This allows the landowner to generate some income while waiting for the market to turn more favorable to sellers.
Know Your Marketing Strategy
To get buyers quickly and sell the land for an optimum price, you need to study the market and know the value of the land in subdivided plots. Study local zoning laws. Can you market your land for retail or industrial use? Does that land have other unique features that increase its overall value? If so, make sure you know what these things are and how much they are worth in the current market.
Things To Keep in Mind While Subdividing Land To Sell
1. Go through the restrictions.
Once you have decided to subdivide your land, it is important to make sure that there are no such restrictions that would make it an illegal step or hurt your land’s overall value. It’s better to consult some local realty expert who can guide you through ordinances to verify that subdividing your land for whatever purpose is in agreement with any covenants, restrictions, or zoning laws.
2. Ensure that your lots will serve as a valuable property.
While you are planning on the idea of subdividing your property, it is important to check if all the lots will be serving as valuable property. As we know that an attractive piece of land has access to different utilities, including roads, open walking space, water, power supply, and even a good sewerage system, so design the division plan with the consideration of these factors. Any negligence, in this case, would risk having one or more of the pieces of land rendered undesirable or even unsellable.
3. Get approval for the subdivision of property.
For proceeding with the subdivision of property, get help from an expert who can assist you with the design of the subdivision. Prepare an application as per the local planning board, attach your design, and submit the application fee.
Work out the cost of subdividing the land to sell and pay as per requirement during the process. Following this process ensures to make you gain value for the divided part. Now, it is all up to you if you want to sell it right away or keep it as a rental property.
4. Know the costs associated with subdividing the land.
Subdividing land can be costly. You will need to consult with experts who can help with the land division, have surveys done, and pay an attorney to draw up deeds that take what was once one piece of property and turn it into many. You may also need landscaping, brush clearing, or other work to make sure the property is ready to sell.
Beware that the real estate market can often turn quickly. Do you have the money to invest in having the land properly subdivided even if it does not sell as quickly as you hope? However, the flip side of that is that if you have land that might be highly profitable in the current market, don’t delay too long before subdividing it and preparing to sell.