Any experience out there in subdividing land and the legal process that ensues?

[Knapptyme]

So I'm looking at an interesting real estate situation. There is a small, rentable cottage on 2.25 acres that could also serve as a great place for the FIL in the future. It is in a desirable location where lots are usually 1/3 of an acre or bigger. In this case, subdividing it into 3 tracts, one of which includes the current house, and the other two sizable lots of roughly 0.5 acres and 1 acre respectively based on where the cottage is located, would fall under the county's "Minor Subdivision" filing and likely be easier to complete.

Anyone out there invest in this kind of property? Am I dreaming? Is the legal process worth it? I've read it could be as much as $20,000 or more depending on the necessary infrastructure costs. The lots would conservatively sell collectively for the value of the land with cottage on it as is. Clearly, my idea is, buy the thing, subdivide, sell the lots, and have an immediately cash flow positive property. I have a real estate lawyer connection, but I thought I'd also try the forum to gain insight from anyone's experience.

[Another Reader]

Easiest way to start is to call the County Planning/Zoning Office, give them the particulars, and see if they will permit such a subdivision for this parcel.  If they will, they can explain the process to you.

[KungfuRabbit]

i looked into it for a house we were thinking of buying, but it turned out to be impossible for various reasons (city code and the land itself).

Setting up new lots isn't cheap though, hooking unto sewer and power can be really expensive.

also, something to think about, is the new lots would need new construction.  where i'm at there are a dozen lots for sale right now in neighborhoods with ~$200,000 houses.  The problem is they want $75,000 ish for the lots, and the cheapest house any builder is willing to make is $300,000+.  You don't want to stick out like a sore thumb like that, so no ones biting.  You may struggle finding someone willing to build a brand new construction house next to a little cottage. 

just a few things to ponder...

[NoNonsenseLandlord]

So I'm looking at an interesting real estate situation. There is a small, rentable cottage on 2.25 acres that could also serve as a great place for the FIL in the future. It is in a desirable location where lots are usually 1/3 of an acre or bigger. In this case, subdividing it into 3 tracts, one of which includes the current house, and the other two sizable lots of roughly 0.5 acres and 1 acre respectively based on where the cottage is located, would fall under the county's "Minor Subdivision" filing and likely be easier to complete.

Anyone out there invest in this kind of property? Am I dreaming? Is the legal process worth it? I've read it could be as much as $20,000 or more depending on the necessary infrastructure costs. The lots would conservatively sell collectively for the value of the land with cottage on it as is. Clearly, my idea is, buy the thing, subdivide, sell the lots, and have an immediately cash flow positive property. I have a real estate lawyer connection, but I thought I'd also try the forum to gain insight from anyone's experience.

Let us know how it works out.  I will be doing something similar, with my 2 acres.  My city will probably require some donation of land or $$ to do it, for the 'parks'.  As stated above, I am going to talk with my city planner and get the specifics.

[Knapptyme]

Easiest way to start is to call the County Planning/Zoning Office, give them the particulars, and see if they will permit such a subdivision for this parcel.  If they will, they can explain the process to you.

Update: Thanks to Another Reader, I have delved into talks with the County Planning/Zoning. The Zoning Office is not yet sure if it is even a buildable lot and are looking into it. Although they said they would call me back, I'm planning on calling back tomorrow (it's been a week). This may not be much, but the place is advertised as "live in the cottage while you build your dream house."

With them on the phone, I discussed subdividing lots in general, and I was told that it is really only for heirs. Maybe I'm just some opportunistic schmuck to them, but it seems inconsistent with what I've seen on that same road. I also wonder if there is ever insider trading type of stuff that goes on with potential deals like this.

[Rural]

Easiest way to start is to call the County Planning/Zoning Office, give them the particulars, and see if they will permit such a subdivision for this parcel.  If they will, they can explain the process to you.

Update: Thanks to Another Reader, I have delved into talks with the County Planning/Zoning. The Zoning Office is not yet sure if it is even a buildable lot and are looking into it. Although they said they would call me back, I'm planning on calling back tomorrow (it's been a week). This may not be much, but the place is advertised as "live in the cottage while you build your dream house."

With them on the phone, I discussed subdividing lots in general, and I was told that it is really only for heirs. Maybe I'm just some opportunistic schmuck to them, but it seems inconsistent with what I've seen on that same road. I also wonder if there is ever insider trading type of stuff that goes on with potential deals like this.

I've not subdivided, only combined adjacent lots, but let me suggest that if you can, you go talk to them in person (make an appointment if that seems appropriate). Putting a human face on a request like this seems to make a big difference,


Do you own the property, or are ywe thinking of buying it? That probably makes a difference, too.

[ShoulderThingThatGoesUp]

Following, I'm wondering about buying a house to subdivide its lot when Fannie Mae realizes it's a disaster and lowers its price.

[babysteps]

Aside - the history of the lot in question may matter. In many areas of the Northeast, if a lot has previously been subdivided or the boundaries changed (over some specific time period, which can vary a lot by jurisdiction - think 'since 1951' or 'since 1978' or what have you), any additional change to the lot requires a whole bunch of review. 

We have had success in making a "free cut" a couple of times.  A "free cut" is a one-time division where all new lots conform to current zoning (and where the property had no prior change in the look-back period).  In one case a survey was all that was needed, in the other we had to get a septic plan done and have an engineer sign off on possible footprint area of the newly created vacant lot.

IME looking at the rest of the neighborhood can be misleading, as zoning regulations tend to be reactionary and may have "de-densified" (our local code office's term) since the building/subdividing was done.

I read the "live in the cottage while you build your dream home" line as 'the cottage is sub-standard and you'll want to replace it' not as 'this property is sub-dividable'.  Usually the listing would say 'possible subdivision' if that is anywhere near possible.

Let us know what you find out!

[arebelspy]

Oh boy, bureaucrats.  Let us know how your call today goes.  :) 

[mr_orange]

I am an experienced real estate developer.  The process varies by locale so speaking with the planning and zoning folks is a great idea.  Have you spoken to an architect about the requirements for design in the area?  The lots are quite big so I doubt you'll have setback, impervious coverage, etc. constraints, but it wouldn't hurt to check and make sure.  Some areas have floodplains, easements, soil issues, topography challenges, heritage tree ordinances, critical environmental features, or historical considerations. 

You may consider hiring a fee developer in your locale to assist if you get more serious about the purchase.  They will know the pitfalls and be able to assist you in the process.  A civil engineer should also be able to assist you with the process of subdividing the land if it is not straightforward to do it yourself. 

What are you hoping to do with the lots once they're fully entitled?  The lot configuration needs to be salable so getting the opinion of a good broker in your area would be a good time investment too.  You'll also need a surveyor to draw the lots up for you.  Again, a fee developer would be able to assist with this. 

[ShoulderThingThatGoesUp]

Is a fee developer what's going on when you see lots owned, developed, and then sold to three separate parties? I've been trying to figure out how that would work, because there's one of those going on in my town and I might want to do something similar.

[mr_orange]

A fee developer is just a hired gun that can do all of the thought work for organizing all of the resources to get something built.  A developer does a lot more than select a builder and oversee the management of that piece.  Entitlements require organizing a lot of resources from various professionals (architects, surveyors, engineers, etc.) and you also need to make sure that the project is feasible and will sell in the market with requires organizing other professionals like brokers, etc. 

This all sounds easy, but mistakes are VERY costly.  If you wish to avoid paying dumb tax a fee developer may be able to help you out a lot.  A lot depends on the type of project, your market, etc.  Keep in mind one wrong step could literally cost you hundreds of thousands of dollars though. 

[Knapptyme]

So I know this is an update much later than anticipated, but I've started to gain some traction on what was likely before just speculation. I spoke with a lawyer friend who works in the county and has connections with his partners who specialize in real estate law. We may go in on the deal together as he can front some money to help the cost of potential infrastructure and handle a lot of what I didn't or couldn't do.

He seems to think that when my call got shot down from the county way back in the summer that I just didn't ask the right people or have enough clout. I'm optimistic, but still realistic. Even if it's much further down the road, I'll keep anyone who's interested posted on developments.

[Mr. Green]

I am an experienced real estate developer.  The process varies by locale so speaking with the planning and zoning folks is a great idea.  Have you spoken to an architect about the requirements for design in the area?  The lots are quite big so I doubt you'll have setback, impervious coverage, etc. constraints, but it wouldn't hurt to check and make sure.  Some areas have floodplains, easements, soil issues, topography challenges, heritage tree ordinances, critical environmental features, or historical considerations. 

You may consider hiring a fee developer in your locale to assist if you get more serious about the purchase.  They will know the pitfalls and be able to assist you in the process.  A civil engineer should also be able to assist you with the process of subdividing the land if it is not straightforward to do it yourself. 

What are you hoping to do with the lots once they're fully entitled?  The lot configuration needs to be salable so getting the opinion of a good broker in your area would be a good time investment too.  You'll also need a surveyor to draw the lots up for you.  Again, a fee developer would be able to assist with this.

As someone who has purchased numerous pieces of raw land and seen them through the development process, I cannot stress how important it is for your to do all your legwork and EVERYTHING differs depending on where you are. If you were serious, you could certainly put an offer on the property with a contingency, or due diligence, period and that would give you time to do your investigation. Vette all aspects of building. Power, septic or sewer, easements, zoning, etc. In my state the power company will put in conduit for free to where ever I want, doesn't matter if the box is 1000 feet off the road, as long as I'm building a new house. In the state we're moving to they estimate the electricity that would be generated by what you plan to build and if that is less than the cost to run the conduit, it's free. If the run is more expensive you just pay the difference. All depends. In some places land locked properties are guaranteed access easements by law, in others they're not.

Basically, pretend like you were going to build a house and run all the obstacles to ground. I've seen plenty of people buy something because they were told it's okay by a realtor and when they go to build there is a problem they cannot get past. Don't take anyone's word for it. If someone in Zoning tells you something, ask them to show you the actual laws so you can verify for yourself. Too many times I've been told a generic spiel when there are edge cases or workarounds that exist, completely legal, that folks just don't want to tell you about.

Edit: Just realized how old this thread is. Perhaps you've run all these things down already. Good luck! I love the development game. It's such a fun process but it can be very stressful!