Owning land is something that many people do for many different reasons. Some own land to use as their residence while others might purchase a piece of land to develop into a commercial property that can be sold for a profit.
Something else that can be done with a property is land subdivision which is a process that someone might choose to do for different reasons.
The following are five common reasons why someone might choose to subdivide land.
1) Earning money using an existing property.
2) Earning a profit using an existing property.
3) Generating income from a new property.
4) Earning a profit from a new property.
5) Land planning for future development.
1. Earning Money Using an Existing Property
If you already own a property that you use as your residence or that you bought as an investment, you could earn some extra money through subdividing your plot of land into smaller lots and then selling either one, some, or all of the resulting lots.
If the single lot you would be subdividing is currently land on which you live, you could still remain living in your current residence while selling some or the rest of the created lots. Your house would just be located on a smaller lot.
The lots you create would be bought by others who might want to build their own houses or who might want the land to use as their own investment property or to further subdivide later.
2. Earning a Profit Using an Existing Property
You can earn a profit from an existing property by subdividing it, developing at least one of the resulting lots, and then selling the lots you developed.
Developing the lots would mean paying the costs involved with the construction of new buildings, driveways, and other items associated with a land development plan. These costs would include the engineering design costs. You would earn a profit if you can sell the developed lots for an amount that is greater than the total costs you paid to have the property subdivided and to develop the lots.
If you currently live on the property you are subdividing, you would be able to stay in your house after the land has been subdivided.
Related: 10 Common Costs of a Land Development Project
3. Generating Income From a New Property
A new property you just bought could be a new source of income if you are willing to invest some money to pay for the costs of subdividing the land and developing the resulting properties into residential or commercial lots that you could then rent out.
Just keep in mind that you would not see a profit until enough time goes by that you are able to collect enough rent that exceeds the total of the costs of your initial purchase of the property, the subdividing of the property, and the development of the property.
4. Earning a Profit From a New Property
If you bought a new property because of a good deal you were able to find, your first thought might be to hold on to the property for a while and then sell it after enough time has passed that the land has increased in value by enough to be able to earn a profit after selling the property.
Another option that could result in a profit for this property is to subdivide it and sell the resulting smaller lots. If you subdivide the property into three or more smaller lots, you could even sell just one of those lots and hold onto the remaining lots to sell later for a potential profit. You would earn a profit if you can sell the lots for an amount that is greater than what you paid for the purchase of the land combined with the costs involved with subdividing the land.
Before selling the new lots, you could potentially earn a greater profit by developing the lots before selling them for higher amounts. However, this would require more money up front to pay for the construction on the lots.
5. Land Planning for Future Development
A land subdivision could also be a good idea for those who want to plan out future land development. For example, assume that you currently live on a large piece of land which you would want to later develop into a couple of residential lots that you would want to rent out or just sell. You could create the land subdivision now so that the lots are ready to go when you decide later to develop the lots.
This could be a good idea especially if you do not currently have the funds to be able to afford to pay for the full development of the lots right away.
What You Can Subdivide
The above reasons for subdividing land assume that the lot you want to subdivide is large enough to subdivide. Also, the number of lots you can create and the layout of these lots will depend on many factors. If you decide you would like to consider subdividing your property, hiring a professional to help you would be something to think about.
Related: 8 Times When You Should Hire a Civil Engineer