Can you make money subdividing property
Learn to evaluate the risks and rewards of subdividing land into residential lots. In this first of three articles on the subject, a developer and real estate lawyer provides landowners specific items to evaluate when considering whether or not to subdivide land.
Successfully subdividing your land into residential lots can have many benefits, including providing a landowner both increased profits and flexibility. Depending on the situation and the local market conditions, you often can increase the total value of a parcel of land by subdividing it into smaller pieces —lots — that are then sold to one or more buyers. In essence, through subdivision the parts can be more valuable than the whole. Another benefit of subdividing for homeowners who would like to liquidate some of their real estate without having to sell the farm literallyis that they may be able to both cash in on a portion of vacant land and stay put on the rest.
Holding onto some of their land can give that property time to increase in value as the surrounding subdivided land becomes developed.
Subdividing Your PropertyIn addition, landowners may more readily find buyers for smaller subdivided parcels that are more affordable than one larger piece of land. Completing the lot subdivision up front saves the purchaser the time, effort and risk of doing it themselves, increasing the salability — and often the value — of the overall property. Subdivision concepts are common knowledge and practice among experienced professionals like home builders, land developers and real estate agents.
In fact, subdividing land really is a fundamental part of all real estate development, but it is only one part of the overall development process. Subdividing land also can be risky and costly if you are not thorough with your due diligence. Whether you own the land or are just evaluating a potential new purchase, the risk that a subdivision is not able to be done — or at least done in a way that makes financial sense — can often cost you money and valuable time.
There are a number of preliminary items that help you decide whether a subdivision is feasible. If you are a landowner or homeowner considering subdividing land into vacant lots, read on to learn more, and — as always — plan to seek the guidance of experts.
So you think your land is a candidate for subdividing?
Think twice before you subdivide - Home Owners, Advice
If you are dealing with a single lot being subdivided into two or three residential lots, you may be able to handle this by working with a few real estate professionals that will help you in the process.
Be thorough during your due diligence and planning so you can evaluate whether subdividing is feasible and makes financial sense. More on this in a minute. Once you get over about an acre in size and two or three lots, the complexity of the subdivision process can rise dramatically.
The level of difficulty — and expertise needed — can be compounded if you have a site where lots will not front on an existing public road or where utilities and infrastructure must be built. In this scenario, you basically are stretching the activity from simply subdividing a parcel to full-scale community and land development.
If you are interested in subdividing a parcel to increase the value or use of your property, we wish you luck — and provide you the following recommendations:.
One of the most important first steps before subdividing your land or land you wish to buy is to make sure there are no restrictions that will block your plans. Everything from ordinances, neighborhood covenants to deed restrictions may prohibit — or fatally complicate — your plans.
Review these items carefully, plus order a professional title review typically through a real estate attorney so that you can understand whether there are any deal killing issues that apply to the property and prevent subdividing.
If you find items during your review that may be problematic, you and your attorney should evaluate them carefully to find a solution, or see if you are able to get title insurance that provides specific coverage to protect you and ultimately your buyers.
Beware, even the pros can get into trouble if they become too wedded to their grand plans. You may get away with bypassing restrictions for a while, but doing so can cost you down the road — especially when trying to sell or finance the property. When subdividing a parcel, make sure your proposed lot layouts and lot sizes are appropriate and will work not only legally, but for the market. Determine the size, layout and other requirements that are expected for new lots to be marketable.
A good real estate agent with expertise in land can help you with this. You also may be able to get some advice from builders — reach out to the ones who are active in your geographic area and in the price range for new homes that would likely be built on your lots.
Getting their input could be the key to successfully subdividing marketable lots. Each county, city or other authority will have its own regulations that describe important items like current zoning requirements, minimum lot widths, setbacks front, rear and sidebuffers, building heights, required open space and other significant details that affect the size and layout of your lots. You also need to confirm that each of your planned lots will be properly serviced. Most homeowners expect to face a public road with adequate frontage and have water, sewer, power and other utilities available.
So be sure to confirm both that typical utilities are available for your lots and that they will have the capacity to handle the load from any new homes that would be built on the subdivided lots. Do your research and have your surveyor locate water, sewer, gas, electricity and other utility lines and infrastructure on your plan. Many of these lot size, layout and service matters will be driven by the local requirements, but others will be driven by the market.
Evaluate these items carefully in advance and include the related costs in your financial analysis and budget. Another surprise to landowners attempting to subdivide their land is that the act of subdividing can raise any number of additional requirements and costs on your land.
While your existing parcel may have been grandfathered so that it does not have to comply with some newer laws and regulations, undertaking a subdivision can trigger a new set of impacts and requirements. Other rules may require you to build or improve roads, sidewalks, curb and gutter and even to plant trees.
In addition, you also may be required to install water and sewer connections and meters for the lots, or to pay capacity fees, impact fees and other assessments when adding the new homesites.
You will need to keep items like these in your budget too, including contingencies for some which may not be known upfront.
We hope this helps provide valuable insight for landowners about the pros, cons and items to evaluate when considering subdividing your land. Check back soon for our second article in this series about Subdividing Land: Tips for Landowners from a Developerwhere we will describe some real world issues that we have seen in subdivision attempts. Plus, the third article in the series will provide hands-on details about the steps to take if you decide to subdivide your land into lots.
He is a Founder of LotNetwork. May 19, at 9: Your sight is great at guiding a new land owner though the development stage. I like that you discuss risks of due diligence and size of the property. November 2, at We have a 20 acre parcel in California. A public road runs through it splitting it into 12 acres on one side and 8 acres on the other side. Is there a state law in CA which allows for an administrative split in such situations?
Steve Sanders at LotNetwork. November 5, at 4: September 22, at 3: I have a home on a lot that is large enough to be subdivided. They said that I can subdivide if I put in a drive tract to the subdivided section. This would provide me with the street frontage required and a conventional driveway would be able to connect to the subdivided section. September 2, at I have an opportunity to buy 53 acres of recreational land.
I was thinking about sub dividing these lots for a private campground. I currently own a single lot in a private campground about 70 acres and most lots are. I am looking ingles stock market do the same as the owner did years ago, but stock broking industry profile possibly my own piece of land.
Without tipping off the owner on this opportunity, land for sale, what problems may I encounter, or unforseen costs will I run into? August 5, at 2: Very informative articles, and exchanges. I have a general question about subdivisions. I am looking to sell a 5 acre parcel, that would accommodate about 45 lots. Would you say there a rough guide, as to what percentage the cost of land should be for each lot sold?
I am not looking to push the buyer to their break-even point, but I want to get a fair price too. August 6, at Very good question, Trevor. We plan to do a blog article on this subject soon.
May 29, at Steve, I reside in San Jose California and and my brother and sister were given our parents home in inheritance and they are considering carving out a parcel for another family member, my question is where to begin this process? July 19, at 2: No brainer trade forex factory 8, at 1: I have 40 acres that has already been subdivided into ten acre parcels.
Our personal home sits on one of the 10 acre pieces. I would like to sell the back ten acres and use that money to build another house on the remaining 30 acres.
Because I am taking the money from the sale and putting it back into the property do I owe any tax?
April 14, at April can you make money subdividing property, at 6: Surveyors can cut sight lines where they need them.
March 27, at 9: In my village there is a 1. I am only looking at about a third of that. Problem is…the entire 1. The backside of the lot the part I am interested in is totally unused and mostly wooded. There is a very distinct treeline stock market gainer where the lot could be divided.
February 14, at 8: Really need some advice!!!!! We have a acre plot of land in the Caribbean.
We are in the process of having a Subdivision drawings done an also engineering drawings. We are not experienced developers!! Would you advise us to eventually go in partnership with a developer i. Or would it be better to sell some lots and get an experienced builder on board?? Really need some advice!!! February 13, at 9: Hi, my father in law has 10 acres of land and we have talked about building a home on an acre of his property. Does he need to subdivide the land to us? And how does he go about doing this?
November 13, at 2: Hi I have 5 acres of land,what is the minimum block of land that can be subdivided to maximise blocks of land for subdivision. November 18, at 8: That really is going to depend on your local laws and any possible restrictions related to the land, as well as the best size how to make money in stocks oneil make the new lots appealing to builders and home owners in your local market.
You should get in touch with local real estate experts in your market, like a surveyor, attorney or real estate agent with lot and land expertise to help you better understand the local regulations and the most marketable lot sizes for your subdivision plans. September 7, at 9: Hello and thank you for this great topic. I have about 4 acres select option using angularjs land in on my residential property.
My home is on the river with a dock etc and has about 1. I have these 4 parcels of land that can be developed into residential properties yet I have no idea how to approach a developer. Should I simply put a sign up advertising these available lots or should I contact private home builders in the area. The home is in a highly sought after area where many would like to build homes.
Any suggestions would be greatly welcomed! September 12, at 6: Thanks for the comments on the article. We have some very good resources here on LotNetwork. Here are a few articles and resources for you to review:. Whether you are working with a real estate agent or not, we absolutely encourage you can you make money subdividing property your agent to target your marketing to the right types of buyers.
June 23, at Steve, my son in-law has 10 acres of land. But if he does sell me these aces. I want to make sure that he gets the land back can the land be in both our like a car title. June 24, at 3: Some of your situation will depend on local regulations as alwaysbut I would think you could handle this scenario by subdividing the 2 acres off as a building site but your son still keeps the land in his name. In other words, there likely is no stocks at 52 week high moneycontrol to transfer the property to you at all unless you just wanted to do it that way.
If he keeps title you also may avoid incurring unnecessary taxes, transfer fees and other transaction costs. Check with a local real estate attorney, and good luck!
June 5, at We currently own 10 acres of land with a lot of road front footage. A very large nice development is underway adjacent to our property; the developer also recently had some type of auction and sold 92 lots. It has been brought to the attention of my husband and I that no homeowner construction can begin until development access issues are resolved.
Presently, they have issues with line of sight entering into and out of the development; the development has a small privately paved 2 lane road entering onto the public highway system. Our property sits high on a small hill, it is large enough to occlude site to the left when pulling onto the highway.
Our home also sits on a curve. We also have fencing — similar to what you might call pasture fence — that also occludes a drivers site pulling out as well. The developer has sent a neighbor also his friend, may even be a partner — who lives in the only house built in the development — although how they built that with restrictions in play — I do not know… Maybe because it was a single dwelling???
First, this representative showed up saying they would like for us to move our fence and they would pay for us to move it how kind. We just listened… And told him we like our fence just where it is — we know that even with the fence moved the line of site is still occluded — the hill would have to come down or be graded somewhat for it to work.
A turn lane was mentioned but no details were given — in fact no plan was presented at all. We think he was just feeling us out. My real question is how much should or could we ask for the property if we agreed to whatever their plan is — of course, we would see the plan proposals and bring in a lawyer.
I have considered 92 lots multiplied by something!
Subdividing for a profit
My husband spoke with a member of the NCDOT who was out here doing some surveying — he stated that the DOT really had no interest in the property — I want to take that to mean they would not force access for the developer — but I do not know — my knowledge is very limited on this subject.
No money has been offered — it was just stated that we would be compensated. It seems we are in the position of power as far as a selling price — as they cannot develop without meeting those requirements. I have found the Policy on Street and Driveway Access to North Carolina Highways and been reading over it. I really do not want us taken advantage of either as far as the construction phase and the end result to our remaining front yard.
June 6, at 1: You can use some of the information that the lawyer gathers to help you understand what you are really facing. With that said, here are some thoughts. This makes me wonder why the developer would be coming to you now about roadway frontage for a turn lane. Usually the road improvement plan is in place prior to the subdivision being formally approved and recorded and the developer secures rights to all of the land it needs for turn lanes in advance.
The existence of lots in this development suggests that the road plans already should be approved. Get information from your local planning or subdivision department as applicable, or possibly the DOT and see if you can find the plans for offsite road improvements for this subdivision.
Do your research to understand the facts. Mailboxes, landscaping, fences and walls often are built in the right-of-way, but will need to be removed or relocated for road improvements.
Subdividing Land: Tips for Landowners from a Developer (Part 1 - Evaluate)
Confirm with a survey where your property line actually ends along the right-of-way. Also, building a friendly relationship with the developer may lead to a buyer for your property in the future.
The developer likely has other options. Usually valuations in a situation like this are based on an appraised or negotiated value per acre or square foot, and then a survey determines the precise size of the sliver of land that is being conveyed at that rate.
Again, I urge you to work with an attorney who knows real estate and can help you look into the facts up front. August 17, at 7: I have subdivided many parcels and the one item a developer should also consider is the NIMBY group. If neighbors do not want your project they can create all kinds of trouble, even if your project meets code so have experienced legal advice! August 16, at August 16, at 1: Consider taxes, sub-dividing may trigger ordinary income tax instead of long term capital gains treatment.
Your email address will not be published. LotNetwork, the LotNetwork logo and The One Site for HomeSites are trademarks of LotNetwork, LLC Reg. Building a Home Resources: Back to Blog Subdividing Land: Tips for Landowners from a Developer Part 1 — Evaluate Share this post: About Steve Sanders at LotNetwork. Discussion Linda Prin says May 19, at 9: Have you ran across a similar situation that has allowed you to subdivide? Hi Steve, Very informative articles, and exchanges.
Get in touch with a local real estate attorney. Do i have to have the back land cleared before i get a suryeor to survey. Here are a few articles and resources for you to review: Let us know if we can help. Steve, We currently own 10 acres of land with a lot of road front footage. Thanks for your post, and for reading the LotNetwork. Excellent, covers all bases for potential developers, from one-into-two, to one-into-many.
How To: Pick Properties to Subdivide for Profit
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