• Subdividing property can greatly devalue tan existing home that is dependent on land to maintain its worthhome sweet home image by David Dorner from Fotolia.com
  
  Subdividing land for living space can provide a homeowner with a boost in income without the burdens of having to sell the house and move. Despite its advantages, many pitfalls exist in the legal area of land subdivision from complicated government procedures to property inspections and the uncertainty of potential buyers.
  
  

Time and Money

• According to the website for the California Survey Division, subdividing land is both time consuming and expensive. Applications and procedural steps can take anywhere from one to five years depending on the size of the property being divided with fees exceeding $1,000. Homeowners seeking to subdivide land will also have to hire surveyors and engineers to examine the property in accordance with local ordinances to determine if the land is fit to build on. These costs can be prohibitive for anyone not expecting to hire private contractors.
  
  

Complicated Taxes

• Subdivision of property has complicated tax ramifications for the seller. According to Findlaw's website, homeowners that subdivide property in excess of five times may be classified as real estate agents for tax filing purposes which means all profits from the sale of property must be reported as earned income. This can lead to a troubling tax time for homeowners that are not prepared for the complex filing requirements for income that isn't immediately taxed.
  
  

No Turning Back

• Once you sell the property, there's no turning back. A homeowner may be unprepared to handle having new neighbors in any area that was once his property. He must also put up with noisy construction crews and contractors while the building of a new home is taking place which can lead to more than a few early rises. The condition of the new home and how its new owners maintain the property may also adversely effect the property value of nearby homes.
  
  

Risk of Financial Loss

• Should a buyer default on payments regarding the property you subdivided you may be called upon to reclaim the property. This provides further tax complications since now you'll have to claim the acquisition of land as additional income and you're not allowed to right the land off as a loss. Should you be forced to reacquire subdivided property it's a good idea to consult with a real property tax attorney before agreeing to terms or signing any documents.