Subdividing or Adding a Minor Dwelling: Which Option is the Right Choice for You?

Profiting from a property investment is a major concern of all landowners in New Zealand. When considering making changes to a home, whether it be through renovation, adding a room, building a minor dwelling or subdividing land, it can often be unclear which avenue will result in the best outcome. Developing a property to add value whether you are thinking about selling or not requires assessment of your means, your needs and what you are willing to invest.

Subdividing and adding a minor dwelling both have their strengths in the property market. Each will significantly increase your profitability on your investment. However, they each come with their unique challenges and their feasibility will depend on your property’s unique factors.

For those considering subdividing a section or building a minor dwelling, here’s what you need to understand to ensure fruitful efforts:

How is Your Home Zoned?

If you have a sizeable pocket of land suitable for subdividing or adding a minor dwelling you need to understand how your home is zoned. The zoning system is determined by your local council and depending on where you live in New Zealand, will decide whether or not this is an option for you.

This process is something that should be realised before you begin applying for council consent. If your property is based in Auckland, there are four types of zoning which include; single house zones, mixed housing urban zones, mixed housing suburban zones and terrace housing and apartment buildings zone.

What is Your Overall Goal?

Are you planning to sell your home upon completion? Or, are you looking to create extra space for a tenant or boarder? Your answer to these questions is crucial to the choice you make between subdividing and adding a minor dwelling. While both of them are poised to help you gain from an investment, they will both result in different outcomes.

Building a minor dwelling on the property is most suitable for those looking to rent out the addition in the long-term. This avenue provides the opportunity to earn a long-term income from the efforts and will allow you to stay living on the property. If you are not looking to immediately sell, subdividing for the purpose of owning two titles could incur unnecessary cost over the period of time you remain in residence.

Alternatively, subdividing a section will allow you to boost your overall earnings if you are planning to sell the property once the process is finished. This is because splitting a single property into two titles increases your overall capital gain. You’re able to sell the properties as two separate entities and this will generally result in a higher return from the investment rather than just adding a minor dwelling.  

Generally speaking, adding a minor property is best if you are looking to invest less in the process. This option is not as costly and will allow you to explore opportunities that this extra space provides. On the other hand, if you are looking to make the most from your property as you prepare to put it on the market and you have the funds, subdividing could be a move that boosts your earnings. This type of development is a larger investment, however, it does offer a better resale value.

Speak to an Expert to Make an Informed Decision

In all cases of property development, the best strategy is to speak to a property expert to get the right advice on your specific situation. By having your goals in mind and understanding your obligations, you will be able to choose the right way forward. A professional opinion can help simplify the complexity of subdividing and adding a minor dwelling, placing you on the right footing for decisions to be made.