Investing in the real estate market is always a lucrative option for those who want to gain substantial financial returns over time. One particular type of property that holds immense potential is the subdivided house. This type of real estate investment can be challenging yet extremely rewarding, provided you understand the step-by-step process of how to invest effectively.
A subdivided house is a larger home that has been converted into smaller, self-contained living spaces. Each unit may have its own entrance, kitchen, bathroom, and utilities. This setup allows one property to serve multiple tenants, often resulting in higher overall rental income. This is also known in the industry as a multi-family rental.
The process of dividing a home in this way is known as property subdivision. It’s commonly used in areas with high demand for affordable housing, especially in urban neighborhoods. By creating more rentable units within a single structure, a subdivided house offers investors a practical way to boost cash flow without buying multiple properties.
Before investing in a subdivided house, it's important to weigh the benefits and the challenges. Here’s a breakdown to help you make an informed decision:
Understanding both the advantages and challenges helps you decide whether this investment fits your goals and resources.
To see it in action, check out the video below for Colby's tips on single-family vs multi-family investing.
The legal side of investing in a subdivided house can be complex, and it’s essential to get it right from the start. While we are not legal professionals, we strongly recommend consulting with one before moving forward.
Key legal considerations include:
Being proactive with these legal steps not only avoids penalties but also adds long-term value to your investment.
Investing in subdivided houses involves a series of well-sequenced steps that, if followed properly, can result in a profitable investment.
A subdivided house can be a practical way to grow your rental income and make better use of a single property. Like any investment, it takes planning, research, and attention to legal details. If you take the time to do it right, property subdivision can be a reliable way to build long-term value in real estate.
1. What is a subdivided house?
A subdivided house is a single property that has been split into two or more separate living spaces. Each unit can be rented out to different tenants, allowing the owner to earn income from multiple sources.
2. Is it legal to subdivide a house?
Yes, but it depends on your local laws and zoning rules. You may need permits and approvals from your city or town before starting a property subdivision.
3. How much does it cost to subdivide a property?
The cost can vary depending on your location, property size, and how many units you plan to create. Costs may include permits, construction work, legal fees, and utility adjustments.
4. Do I need a real estate lawyer to subdivide a house?
It’s highly recommended. A real estate lawyer can help you understand local laws, prepare legal documents, and avoid costly mistakes during the subdivision of property.
5. Can I live in one unit and rent out the others?
Yes! Many investors choose to live in one part of a subdivided house and rent out the other units. This helps cover the mortgage while still building equity and is known as house hacking.
6. What are the risks of owning a subdivided house?
Some risks include higher maintenance costs, dealing with multiple tenants, and possible legal issues if the property isn't divided properly.
7. Is a subdivided house a good investment?
It can be! A well-managed subdivided house can bring in more income than a single-family home and often increases in value over time.
8. How do I find out if a property can be subdivided?
Start by checking with your local council or planning department. They can tell you if property subdivision is allowed in the area and what rules apply.