Stay abreast of policies and regulations affecting your second home.
Your property may be worth more divided into parts if you are selling.
Before considering dividing, do your due diligence.
Did you know?
Zoning regulations can change – think long term.
You bought a lake second home several years ago and the lot included with your home was several acres. You’ve come to the conclusion your second home on the water with a little land around the house for some privacy is all you really need, and property values in your lake community are skyrocketing. It seems the time is ripe to divide your original lot into two or more parcels to make a little money on your original investment and still keep the lake second home you love.
Like almost any decision involving real estate, looking into dividing your second home property will require some research. The primary factor is to find out if your property can be divided, and if so how is the use of the newly created parcel limited by zoning regulations. Any research you may have done in the past will probably need to be repeated to some extent because zoning ordinances notoriously change depending on the political winds and other factors.
Go to the community’s planning department and find out if the real estate division will require any level of approval or a public hearing, and other details about restrictions and use of the new parcel of land. As you negotiate City Hall and continue through the research process, keep your neighbors involved in your plans. They might offer some insight on how to expedite the process, and keeping them on friendly terms will be a great asset as you seek to divide your property.
Make the Most of the New Land
After you’ve successfully divided your original second home property, make sure to take steps to maximize the profit when selling the new plot. Remember the divided land you are selling no longer is a part of your second home residence and your profit will face a capital gains tax. Figure this profit by subtracting the cost of the new land from the sale price. The new land’s cost is the portion of your original investment allotted to the new land along with any expenses incurred while dividing the plot off the land you are keeping. Be prepared to defend this figure to the IRS if necessary when tax day rolls around.