Two houses, one title

First call  the council and find out if it would comply with the subdivision rules for that area.  eg there might be a minimum block size, minimum backyard size per dwelling etc.

The subdivision itself will probably set you back less than $10k, but call a surveyor in the area and ask. 

There might be extra "requirements" imposed upon you by council, the water company, the gas company, the electricity company or the telephone company.  for example, there's some law that says there cannot be electricity wires that drape from one property to another.  If you have this, you might be forced to pay for the installation of a pit, plus fork out for the cost of the sparky to rewire it all.

A subdivision is a wonderful idea if you don't face problems such as the above-mentioned one.  Be warned, if you subdivide and keep both, you'll be hit for TWO sets of council rates, water bills etc. 

It is easier to subdivide with a smaller lot if there is already a dwelling on the lot, or if you provide plans to show a proposed dwelling that could be built on the lot.  That way council doesn't have to guess and speculate at what could fit there

Old Man Jim,

What you are proposing is reasonably unusual in my experience. If this is a suburban property there will almost certainly be a need for a TPP (DA) for the subdivision. The Rescode density requirement is (generally speaking) 1:300m2, but this doesn't necessarily mean each allotment needs to be 300m2, rather that the sub-divisible land should support the ratio.

Everything else being equal one would assume that two separate houses on two separate allotments would be considerably more valuable than two houses on one allotment. You may not need to sell one to realise the value, instead you might consider subdividing and revaluing the separated properties as they would then be separate securities from the financiers point of view, therefore your equity will have increased and your ability to leverage will have improved.

Best of luck with the project.