The Guide to Subdivide
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
The Complete Guide to Subdividing Your Property
Introduction
Subdividing property can be a lucrative way to profit from real estate. By reducing your lot size and selling a portion, you can keep your home while capitalizing on your investment. Although obtaining a permit to subdivide can be complex and time-consuming, with the right approach and information, it becomes a viable and potentially profitable strategy.
Understanding the Process
Every municipality has its own application process for subdivision. While this article outlines common steps, remember that procedures can vary depending on your location.
Preliminary Research
If you're considering buying property for future subdivision, conduct thorough research in advance. Review land surveys and investigate the local subdivision requirements. Ensure the property meets minimum lot requirements as specified by the municipality. Keep in mind that requirements can differ even within the same town. While research doesn’t guarantee success, it helps assess the feasibility of subdivision.
Assessing Existing Property
For properties you already own, compare local subdivision requirements with your land survey. If dividing your lot meets the minimum requirements, you're on the right track. If not, explore different zoning areas within your town. Applying for rezoning can be a potential first step.
Checking Ordinances
Next, examine any subdivision ordinances that might affect your plans. Some areas require specific street frontage or infrastructure like new streets and utilities before sale. Once you meet zoning and ordinance requirements, proceed to the next steps.
Drawing Plans
If you're on track, hire a land surveyor to create a detailed plan for the prospective lots. Consult your local building and zoning department for recommendations and to estimate costs. Your plan will be submitted to the city and might require revisions or could be denied. Consulting a local attorney specializing in zoning and land use can be beneficial here.
Financial Considerations
Before subdividing, consider your profit strategy. When you sell the lot you live on, you can keep up to $250,000 in tax-free profits as a primary residence. Selling the other lot is considered an investment, subject to 15% capital gains tax in addition to state charges.
Tax Strategies
To avoid capital gains tax, consider a 1031 tax-deferred exchange. This involves purchasing a different investment property of equal or greater value. Be mindful of specific deadlines and let a third-party hold the sale proceeds in escrow while you find a replacement.
Conclusion
Navigating the subdivision process requires precision and adherence to each step for success. While there may be upfront costs, the long-term rewards can be substantial. Equip yourself with the right knowledge and professional help to make the most of this opportunity.
You can find the original non-AI version of this article here: The Guide to Subdivide.
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