I guess it all comes down to experience and what alternatives you feel comfortable with. I am considering a similar thing witha property of mine on a 739sqm block.

My only concern with biulding on or either selling the back of the block after subdivided and approved is that 1) Capital outlay for no immediate return, having to support the project throug 6-12months 2)what would this do to your chances of renting or maintaining a tenant when they realise theres going to be constrution at their back door.

Regards,
Jarrad