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Splitting Can Be A Superb Solution

One way to increase the value of a property is to split the house into two or three dwellings, writes Lucia Xiao.

By: Lucia Xiao

1 November 2022

Working at Massey University, Melvin purchased his first owner-occupied home in 2020 in Pukekohe for $680,000.

At the time he didn’t think too much about property investment. The hour-long commute between his home and workplace proved to be an inconvenience, so he sought a new purchase on the North Shore. However, when he approached his bank and other mortgage brokers to secure funding, he was told he would not be able to buy a new home because he had no equity.

Similarly, family told him he would need to sell his current house if he wanted to buy a new home.

Melvin was sceptical when he first encountered Finax, even using a fake name when registering for a property workshop. But when he attended the workshop he found most of the content resonated with him and his situation. The workshop sparked hope he could achieve what he wanted despite previous rejection.

Melvin told us about his situation and was originally insistent on keeping his home. He learnt his property was far from a textbook investment: a small 400m2 with limited development potential. Undeterred, together they searched for a way to work with what he had. And we provided him with an idea: split his four-bedroom house into two three-bedroom units. The new dwellings would increase the rental return (once he moved out) and increase the value of the property, which would create equity he could borrow against in order to purchase a new home.

‘A designer was introduced to Melvin who was able to come up with a special way to add bedrooms’


A designer was introduced to Melvin who was able to come up with a special way to add bedrooms despite a big sliding door in the lounge. Melvin had finally found his solution. Still, he needed to secure financing from the bank in order to complete the build. By the time he had building consent the value of the property had increased significantly, with the valuation of the upcoming project coming out to $990,000. With the help of Finax he was able to secure $110,000 in project funding.

Melvin reduced costs as much as he could. He and his father, an expert builder, decided to DIY the project with the help of his brothers and cousins. Melvin sought
out the best deals he could; most notably the cabinetry for the kitchen was sourced from just up the road, being thrown out for just $5, saving around $5000.

However, it was not all smooth sailing. The small amount of manpower, alongside Covid restrictions and industry-wide material shortages, meant the build took much longer than expected. Originally set to take three to five months, the project ended up taking over a year.

The build was stressful for his young family as the renovations were completed while his wife and four children were living on the property.

We suggested renting while working on the project, but Melvin believed the cost was too great and he could find a way to work around his family. He did so by working on one side at a time; once one unit was completed the family shifted over, so work could begin on the other half.

Now only waiting for CCC, it’s predicted the final valuation of the house will conservatively come out at between $1.1 million and $1.2 million. His neighbour has a three-bedroom cross-lease property that recently sold for $950,000. The two three-bedroom units are expected to earn him $600 a week each, and as the total return will be more than double the current mortgage repayments, the property will act as a secure source of cash flow.


Melvin gained invaluable experience through this project. Dealing with finances and logistics by acting as the funder and project manager is a lot to ask. The renovation also took much longer than expected, so he has decided to use our professional contacts for the next one. He has taken greater responsibility for his
personal finances, now free of all personal loans as everything has been lumped into the mortgage.

In hindsight, Melvin says he would have purchased a different property, but he focused on working with what he had. He now shares what he’s learned from us and is completing this project with the hope people will learn from his mistakes and help his kids’ property journey.

Lucia Xiao is passionate about helping Kiwis reach their financial potential, and she has over 15 years’ banking experience, and success in the Auckland property market. She can help you reach financial freedom in the Auckland market, without buying units, apartments, or new builds, while still achieving a 5%+ yield. www.finax.co.nz www.luciaxiao.co.nz @LuciaXiaoFINAX

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