Author Topic: Subdividing Land - Any Experience?  (Read 721 times)

sammybiker

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Subdividing Land - Any Experience?
« on: July 27, 2018, 10:57:20 AM »
Who has some experience subdividing land and can give me a breakdown on the basics required to move forward?

A rundown single family home is for sale on a 6 acre lot.  The lot is within city limits and the city is very desirable, growth is strong and will increase, schools are excellent.  This property is for sale at $155k.  The home, while requiring rehab, is worth at least that much - the land, if it can subdivided, would be gravy.

It's a long narrow lot (see below mark-up) which I think may turn off some investors but there is plenty of room to organize smartly into a nice, dead-end area of houses.

- I called the city and spoke with zoning this morning.  They wouldn't give me much info over the phone and requested that I come in to discuss with them.  They encouraged me to bring my survey, some plot plans and an engineering report of the topography.

I don't own the property but am trying to understand what prep work I can do BEFORE purchasing to ensure a project like this is feasible. 

ThomasRd by sam burn, on Flickr

jwright

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Re: Subdividing Land - Any Experience?
« Reply #1 on: July 27, 2018, 01:38:40 PM »
I imagine you need to speak with local zoning officials because requirements would vary everywhere.  In my area, you need to have a house that has a streetfront for emergency utility vehicles.  This set up you've shown would need to be placed in a Horizontal Property Regime.  Then you'd have to have an HPR entity that oversaw the "common areas" (essentially an HOA). 

What is the plan?  To sell off lots individual homeowners?  Build new houses and then sell? 

If you are building houses to sell, you are a developer and going to be hit with SE tax and ordinary business income.  If you do go this route, the tax strategy is to hold the land for a year and then sell it to a related entity in an installment sale to lock in the capital gains on the land appreciation. You'd pay down the installment note as lots closed.   See a CPA. 

tralfamadorian

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Re: Subdividing Land - Any Experience?
« Reply #2 on: July 27, 2018, 02:30:35 PM »
I would meet with the planning people and reach out to any builders/real estate attorneys that you may know in the area to give you a lay of the land of what is allowed and what the process is like. Try to ferret out the contact info for someone who has done the same thing in that county/city. There are usually just a couple/few local guys/gals whose names will keep popping up- see if you could take one or more of them out for coffee or lunch.

I would also look up the municipality's code online to get an idea of what is currently permitted in the area but I'm a sucker for that kind of research. Some municipalities will drag out the process for years for a legally allowed subdivision. Some are happy to give special permits for changes that are against the code. See if you can find out what you would be getting into.

px4shooter

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Re: Subdividing Land - Any Experience?
« Reply #3 on: July 28, 2018, 07:58:12 AM »
What is the zoning designation for that area? That should give you density.

A 2 way road is going to suck up a lot of space especially with setback. Your house spacing is very tight in that concept too. We have regs for 1 home per half acre and it includes any share roadway. Most common concept is a culdesac.

As.for talking to developers...... I did that and the guy bought it from under me.

Fishindude

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Re: Subdividing Land - Any Experience?
« Reply #4 on: July 28, 2018, 10:06:58 AM »
I'll bet they will make you put in utility extensions, road, curbs and sidewalk to city specs which isn't going to be cheap.
Go sit down with the city planner and show him what you are thinking, then discuss.   Note - If it's a good idea and a good price, don't be surprised if your idea leaks out and somebody else jumps on the deal.

sammybiker

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Re: Subdividing Land - Any Experience?
« Reply #5 on: July 28, 2018, 10:15:49 AM »
Funny @px4shooter, I was thinking the same thing re: developers grabbing the property from me.  That said, for me, it's probably a bit paranoid, especially as the property is listed on the MLS.

Good insight, thanks.

Same thanks to @tralfamadorian and @jwright

Not sure of the end plan, I think I'd actually like to build out everything and then eventually sell.

I'm back outside of the country but my girlfriend visited the zoning office on my behalf and they were very helpful.  Shared with us that we could squeeze (14) lots onto the parcel if setup appropriately.  They advised though of creek that runs half way through the property (not seen above).  They also provided the neighbor's info as they sit on a nicer (wider) 9acres.

I contacted the neighbor yesterday afternoon and he was happy to share his experience on the property (it's actually his father's property, still living) and the property next door that I was interested in - he played in their field as a kid.  Best part, he confirmed it's not creek in the middle, only a fence line :)  Great little tidbit as I'm sure the zoning office telling everyone there is a creek running through the center is keeping other buyers away.

Anyway - got on the phone with a civil engineer and will start putting together a proposal package along with estimates.  Code acceptable sidewalks and a 27' wide road are required and won't be cheap.  We'll see what happens.

Thanks all for the input, much appreciated.

sammybiker

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Re: Subdividing Land - Any Experience?
« Reply #6 on: July 28, 2018, 10:16:40 AM »
@Fishindude  I typed my reply as yours posted - everything you said was right on the money.

tralfamadorian

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Re: Subdividing Land - Any Experience?
« Reply #7 on: July 28, 2018, 10:24:09 AM »
As.for talking to developers...... I did that and the guy bought it from under me.

I'm sorry that happened to you. I should have added a caveat to my post that when speaking to anyone like that to ask more about their experience and generalities, not to discuss a particular parcel or give an impression that you have a parcel on your radar.

Car Jack

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Re: Subdividing Land - Any Experience?
« Reply #8 on: July 30, 2018, 07:48:06 AM »
Understand TODAY's requirements by the town.  In our town, this would not fly.  Although some older roads exist that look similar, newer requirements in my town include at least 2 ways in/out of a new development.  No cul-de-sacs, no dead ends.  Is this on a hill?  What's under the hill, if a road is to be put in.  I ask because my entire area is on top of granite and while it's certainly doable to blast out the rock for a road (was done near me), that's expensive.

Field123

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Re: Subdividing Land - Any Experience?
« Reply #9 on: August 21, 2018, 07:34:48 AM »
Hey Sam - I was reading your other thread about the long distance rehabs and came across this. I see we're a bit outdated but I'd be happy to share what I know.

The subdivision process will vary from jurisdiction to jurisdiction and is therefore highly localized. Your ability to subdivide is also every bit as political as technical. What I'm sharing is based on my every day experience in South Carolina but my intention is to provide a broad enough reply that it would apply anywhere.

Your first resource is the applicable zoning ordinance. The property will have an existing zoning that will specify the use, permitted density, and any lot specific requirements such as lot size, width, and setback requirements. It is of course possible to re-zone a property or obtain variances, but my experience would show this is entirely a political issue and very loosely tied to what is strictly logical. Often the planning department staff will work with you only to be overruled by County/Town Council.

If you think your plan could be feasible, the next step is to put the property under contract. Land contracts are entirely different than your typical home purchase contract. In my area, it is typical to have a very low (less than 1% earnest money deposit) and a 90-180 day "Due Diligence Period". The Buyer has the right to cancel the contract for any reason or no reason during the due diligence period and is entitled to a refund of the earnest money.

The goal is to have your project fully entitled (subdivision approved) during the DD period. This eliminates all legal risk. Ideally, you want to develop land construction plans and have those bid during the due diligence period as well so that you can have an accurate budget. This eliminates 90% of your risk.

Professional developers NEVER close on non-entitled land.

You will need to hire a civil engineer who will do all the heavy lifting on this. In my area, the civil engineers are the experts on the zoning code. They will design the subdivision, work with Planning staff to get it approved, and can help with bid procurement and budgeting.

Typically, the land development process goes in this order:

1) Identify subject property. Do a "back of the napkin" budget to determine whether the parcel is worth investing due diligence resources.
2) Get the property under contract with the longest due diligence period possible.
3) Hire an engineer. Have them perform a "concept drawing". Run an initial budget off this concept to determine whether you kill the project at this point.
4) Hire a surveyor to do a boundary, tree and topographical survey. This is the first big expense.
5) Provide the survey to the engineer and have the engineer draw a preliminary plat of subdivision based on the survey info. (Pro tip - make sure your engineer approves of your surveyor before hiring them. Miscommunications between these two consultants are common and costly)
6) Obtain "Preliminary Plat Approval" or "Sketch Plan Approval" (your location could have its own name) which entitles your project and allows vested rights for a certain number of lots.
7) Run another budget. If you don't have the knowledge to do your own, have your engineer do this for you.
8) Now you can close on the property if necessary. Consider carry costs however and do what you can to avoid closing for as long as possible.
9) Have the engineer draw actual civil construction plans. This is your most expensive "soft cost".
10) Get the civil drawing approved. Depending on your location this could happen very quickly or take over a year.
11) Bid out the plans to contractor.
12) Perform the horizontal development

Feel free to hit me with any questions. Good luck!

Source: I am a real estate attorney by trade who now works as the land manager for a large development company.

sammybiker

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Re: Subdividing Land - Any Experience?
« Reply #10 on: August 21, 2018, 10:24:31 AM »
Wow, wow...I think I owe you a beer, @Field123

I'm going to reread what you posted and may ping you directly with some follow-up questions.  Great insight with what you posted, THANK YOU.