Is It Smart To Subdivide A Property

Q: My husband and I inherited a property that has been owned by my family for decades. I don’t want to sell it. Do you think we should subdivide it to make more money? Vicky, Red Bank, NJ

A: Whether you should subdivide a property depends largely on the local market conditions, the size of your property and your financial goals. Subdividing can increase the overall value of your property and subdividing can increase the revenue the property can generate. As with most financial decisions, you should do a cost-benefit analysis and consider the costs involved, including surveying, engineering, legal fees, and potential infrastructure upgrades before deciding to subdivide. 

In addition, after you subdivide, you can also expect to pay higher property taxes (after the property is reassessed), higher insurance premiums and potentially higher maintenance costs. A decision to subdivide means that you are choosing to spend money now that you hope to recoup over time in additional equity and/or revenue. Do the analysis under different scenarios and figure out if it’s worth the cost–don’t assume that subdividing will necessarily make your property more valuable or more profitable. Thanks for your question, Vicky.

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