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. The owners could also opt to buy one of the new homes, getting a brand new house and $750k of cash in the bank.