Top 6 considerations when subdividing the family home
If you’re contemplating subdividing the family home there are numerous issues you need to weigh up to ensure you’re making the right decision. Here are the top 6 things you need to consider when deciding to subdivide your property.
Owner occupiers are increasingly deciding to subdivide their family home as areas in our capital cities are rezoned for higher-density development to make way for our growing populations.
Carving up the family block isn’t a step to be taken lightly as there are many issues that need due consideration. Here are the top 6 points you need to weigh up before making a decision to subdivide your own home.
- It could inhibit the future sale price of your home.
Subdividing your family home impacts its value. To which extent will depend on the size and type of your home as well as the way it’s subdivided. For example, you may have a large 4-bedroom, 2-bathroom property suitable for a larger family, however if you subdivide the property and sell the backyard, this may deter prospective buyers in the future and impact the sales price of your home if you wanted to put it on the market.
- Can you use the equity in your home instead?
When subdividing a family home with the goal of realising the value of the property, another option would be to use the equity in the home instead. This way you’re able to keep the property as is, but you can then draw the equity to use as desired.
- Will you make a profit?
After you have subdivided your property and taken all costs into consideration, will you make a profit? This includes costs of a land surveyor, selling agents fees as well as any negative impact on the value of your existing home.
- What are the tax implications?
A common mistake made by those who subdivide their family home is a lack of understanding about the tax implications. Make sure to speak to a qualified accountant so you’re aware of what you’ll need to pay the tax man.
- It allows you to downsize without moving
If you’re an empty-nester and your children have grown up and moved out of the family home, you might be considering downsizing, particularly if you have a big backyard that requires considerable upkeep. If you can keep the existing dwelling, subdividing the backyard off from your family home can be a good way to downsize without the headaches of moving. You may also prefer to subdivide the land, build on the new lot and move into the new dwelling before selling or holding the old house.
- Is it better to sell or hold?
While subdividing the family home and selling a vacant parcel of land can provide a financial boost, it may be better to build on the new parcel of land and lease the new property. By doing so, you will receive rental income and can take advantage of future capital growth.
Everyone’s situation and goals will be different when it comes to subdividing the family home, but it’s important to weigh up these considerations to determine what’s right for you.