To subdivide land or not subdivide is a choice many land owners face at some point if they have a large property. This article will help you navigate how to do it, how much costs are likely to be and whether you should subdivide land or not.
Perhaps you wish to split a large parcel up into the smaller parcels to divide between your children. Perhaps you decide that it is time to sell half your property, put some cash in the bank and keep the other half. Or perhaps you are a developer and subdivide land as your sole business model and make large profits when you get it right.
There are a few hoops to jump through, applications to be filed and approvals to obtain. But as these small impediments put a lot of people off going through this process, this may create opportunity for you if you wish to develop this skill set.
Let’s explore what is involved when you subdivide land.
To subdivide land mean to break a larger parcel into smaller lots.
For example you might have a 90 acre parcel and decide to subdivide it into 2 x 45 acre parcels. Maybe you keep one and sell the other.
Or maybe you have a 10 acre parcel and decide to subdivide it into 5 x 2 acre parcels.
There are unlimited ways to go about it, depending on your goals. You must go through the process and do it legally with the approval and permission of planning and zoning. Otherwise even if you are able to record the new parcels with the recorder, you may not be granted a building permit or you may not be able to sell them at a later date.
Be prepared to do some research and get approval from the county at every step along the way.
One of the joys and benefits of being a land owner is that it gives you many options. You may employ different strategies on the same land parcel at different stages of your life.
For example perhaps you purchased a large acreage before you had kids as an investment for your retirement. Smart move!
Perhaps when your kids were young, you used it to take them camping, and teach them how to ride horses.
Perhaps you taught them how to shoot, fish and cook over an open fire.
When the kids grew up and left home, perhaps you and your spouse decided to live on the property for a few years and grow your own produce, decrease all bills and be self sufficient.
Perhaps that was a great adventure but now in retirement you acknowledge that you no longer need all this land?
You may wish to subdivide the land to sell off half of it for a decent chunk of cash but keep your home and some of the garden.
Developers sometimes subdivide land as their business model and seek out larger parcels with the sole purpose of generating cash flow when they are split into smaller parcels and sold off as smaller lots.
Other investors subdivide for cash flow. They subdivide land then build homes, retail outlets or industrial warehouses. They then lease or rent out the property for long term cash flow plus capital appreciation of the land over time.
There is a strict legal process involved when you wish to subdivide land.
This will differ depending on your state, city, and planning and zoning rules.
Some counties, cities or towns post relevant and useful information how how to subdivide land in your area on their website. Check this out as a first step then go ahead and call planning and zoning and have an informal chat to glean more information about how subdivide land in your area. These steps will give you an idea of whether your land qualifies for subdivision.
Make sure you find out about everything you need to know and what will be required in order to sell the land at a later date. You will need to know the local zoning laws including setbacks, access, easements, utilities and road access.
Check if there are any restrictions or reasons why your subdivision would not be approved.
Also check the deed itself to see if there are any restrictions there.
If there is a rule or impediment in the way of your progress it is always a good idea to chat with the local planning office as sometimes these rules are historic and can be updated/modified.
Though if they are there for a reason, you may not be able to proceed any further.
Hire a licensed surveyor to draw up plans for you.
They will take accurate measurements of the parcel and the lots it will contain. They will also mark the land out with flags to show where the division of the property will be. The surveyor will also prepare legal descriptions of each lot on the parcel which will be used on all legal documents. They will prepare a plat map of the surveyed land that identifies the land boundaries, access rights-of-way, flood zones and easements.
Once your preliminary plat is approved, you will require a second review if you decide to do construction on the site. An engineering review will be required of your proposed subdivision’s construction plans. According to Bigger Pockets, this will includes a review of drainage patterns, street design, and utility construction by the jurisdiction’s engineering departments.
This step requires very detailed plans that have to be designed and drawn by a licensed engineer. Do not do this yourself but hire out to a local engineering firm.
Before you subdivide land, make sure you also chat with a real estate attorney to see if there may be any issues lying ahead that you had not foreseen.
Also local real estate agents can be great sources of information to ensure that the lot size you are planning is actually what local people want. Otherwise you may be stuck with a ton of lots that you cannot sell.
If this happens, you will be out of pocket and it will be expensive and time consuming to remedy.
Perhaps most people in that area are looking for 10 acre parcels, so if you were subdividing land in 1 acre lots in order to sell the parcels on, you may wish to switch and make the 4 x 10 acre parcels from your 40 acre lot.
If the real estate agent lets you know that people are only buying lots with septic already installed, you may wish to run a feasibility test of how much it will cost to install septic.
Once your plan to subdivide land is sound and you have chatted with various experts and gained clarity on the way forward, you will need to submit and application and a plan.
Then you wait. Some applications may be discussed and approved at a normal closed meeting. Other applications will require a public hearing.
You may be asked further questions, or be asked to change something in your plan.
If after submitting your application, it is denied, then do not leave it there.
Instead talk to the officials about what the problem is. Very often it is sometimes that you can address quite easily.
Go and fix the problem then appeal the decision and apply again.
Or it may be necessary to speak with your real estate attorney again and get help through the road blocks.
Check out this video explaining the process of how one property developer operates. This chap divide his lots into 2 parcels and is very experienced in subdivisions.
This will vary in each state.
But as a rough guide, it could cost around $1000-$2000 to subdivide land in two.
It will cost around $5K-$10K to subdivide land into more than two lots.
The surveyor will charge between $500-$2000 in addition to that depending on the size and complexity of the parcel. If you have a very large parcel the surveyor’s fee might run into tens of thousands to subdivide land.
Some counties will insist that you do improvements before they give approval for you to subdivide land. They may want better access to roads, sewer or utilities. If these are required, they may set you back tens of thousands of dollars.
Once the land is subdivided, you will obtain new title documents for all the new parcels.
There may also be hearing fees, recording fees, review fees and tax map updating fees on top to pay for.
Sometimes, it is quite straightforward.
With vacant land parcels, depending on what you propose, often the process can be much simpler. It will depend whether your plan to subdivide land involves simply turning a large lot into smaller lots. Or whether it involves putting up buildings and adding services and improvements.
When you know how to subdivide land, you could go through the process once or twice, then rinse and repeat. The aim would be to buy land fast and profitably. You could take advantage of owner financed land, so that you only put a small amount down and make monthly payments whilst you are getting your plans approved.
This way you can secure a lot of land in the area you want quickly. Then once approved, you can cash out the owner and move forward with your development and selling the newly formed parcels to your grateful buyers.
The process to subdivide land generally takes 9 months to a year.
There is the planning process, applications and hearings. It will depends how ambitious or straight forward the project is. If you have to go away and build roads and structures, it will take a lot longer.
Sure there is a lot of work involved and upfront costs but there are huge profits to be made if you do it right. Land investors are often very creative and always looking for way to add more value. If you are considering subdividing your land, do not be put off because there are a few forms to fill in. Instead, a simple chat with planning and zoning will let you know fairly quickly whether it is likely to be straight forward or not.
When you decide to subdivide land, there are a lot of unknowns at the beginning. There is significant cost and risk upfront when you decide to subdivide land. It may pay off big time and is worth considering depending on your initial research and chats with local planning and zoning.