John and Judy own a 1500m² property in Orewa, worth $2M freehold. They partner with Sentinel Homes and agree on developing the rear of their section with four 3-bedroom townhouses.
A company is formed, and the company buys the property from John and Judy at the market value of $2M. Sentinel Partners organises the subdivision, design and build of the townhouses. Once complete, they are sold for $1.5M each — a total of $6M.
| Cost of existing home & land |
$2M |
| Cost to subdivide & build |
$3.5M |
| Income from sales |
$6M |
| Profit |
$500k — split 50/50. |