A Property24 Reader raises a subdivision and investment option query

I own a block of flats in the Alberton North area. The building consists of 8 flats and a house which is adjacent to the flats that are rented as a business premises. I would like to sell the property and have considered the possibility of either:

  • Subdividing the flats and selling them off individually or,
  • Subdividing the house from the block of flats and selling them off separately.

 

I have been told that it would yield a better return this way, however, I am concerned about the costs and time frame as I don’t have the extra money as capital. Can you give me some guidance and costings etc. and what would be the best way to do this?

The first consideration you will need to give some thought to is the marketability of the different options. You need to decide how quickly you would like to sell taking into consideration the return you would like to achieve, and the budget you have to make the changes. I would therefore suggest you discuss the different options with a reputable estate agent who works the area in which the properties are situated as soon as possible.

Your options are:

  • Sell the whole property as you now own it: It is quite possible that you will find a buyer who would like to renovate and lease the parts of the property as you are doing now. This will save on your cash flow and you will realise the proceeds reasonably quickly.

 

  • Subdivide the block of flats from the house and sell the block and the house separately:
    • The cost of a subdivision of the 2 parts would be about R150 000, which would include townplanning costs, municipal costs, surveying costs and the conveyancing costs.
    • This entails an application to the municipality, usually by a townplanner, and the initial consent to the subdivision by the municipality, a surveyor framing diagrams and registering them at the office of the Surveyor General, the conveyancing attorney then preparing the new documents for registration at the Deeds Office and submitting these to the municipality for final approval and lastly the actual registration process at the Deeds Office. The time scale would normally be 12 to 18 months.

 

  • Sectionalise the whole property – 8 flats and the house and sell them all individually:
    • This would entail opening a Sectional register for what would be 9 (8 flats plus house) sections and selling them off individually. If your building plans submitted to the municipality are correct, you may not need an architect. If they are not correct, an architect may charge about R20 000 to update the plans and then have them approved by the municipality.You would then need to instruct a Surveyor to frame Sectional Plans and have them registered in the office of the Surveyor General. The Surveyor’s costs will be about R25 000. Once this is done the Conveyancer will prepare an application to open the sectional register and individual Certificates of Registered Sectional Title for each section. The conveyancing costs will be about R15 000.00 and this process should take 5 to 9 months. You may well receive the highest purchase price if you follow this route.

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