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The Voices of Land blog

Get insight on current land trends and issues from experts across the land real estate industry.

24Jun

Five Steps to Subdivide Land

Subdividing land involves dividing a single piece of land into two or more parcels. In some cases, someone with a 500-acre farm might want to sell 100 acres, so they need to first divide the property into 400- and 100-acre lots. In other cases, a property developer might want to divide a 100-acre plot into 100 lots it can sell to residential buyers. Regardless of the intended outcome, you should know the basics of subdivision land development to help ensure you meet legal requirements and earn a profit from sales.

Preliminary Considerations When Subdividing Land

Taking some preliminary steps will make the rest of the land subdivision process much easier. Perhaps most importantly, you need to conduct a feasibility study that shows how you can subdivide the land and whether there's demand in the area for the type of properties you want to develop.

Essentials of a Feasibility Study
The essential components of a feasibility study include a site analysis and market analysis.
A surveyor will conduct a site analysis examining the property's physical elements, including soil health, topography, and drainage. These details will help you determine where to draw property lines and add new structures. For example, you wouldn't want to put a new building in a wetland that floods often.

The market analysis investigates the demand for property in the area. It typically looks at similar properties to determine whether you can generate a profit from subdividing the land.

Local Zoning Regulations
Local zoning regulations could influence how—or whether—you subdivide your land. It's a good idea to hire a real estate professional familiar with the area's zoning laws so you can make informed decisions.

Legal Requirements for Land Subdivision

The legal requirements for subdividing land will vary depending on your location. However, you can expect to fulfill a few obligations before proceeding with your project.

Permits and Approvals
Reach out to the appropriate county agency to determine which permits and approvals you need before subdividing land. You will likely need to provide a detailed project plan, apply for land use approval, seek state and federal environmental permits, and coordinate with local utility providers.

Environmental Impact Assessment
An environmental impact assessment describes how your land subdivision project will likely affect the surrounding ecosystem. While your assessment will include specifics about topics like the impact on biodiversity and water drainage, it should go further to cover subjects like how increased traffic will affect the environment, people living in the area, and nearby businesses.

Homeowners Association (HOA) Rules
If your land is within a homeowners association's jurisdiction, you must work with the HOA to ensure you comply with its rules.

Financial Planning for Land Subdivision

Land subdivision can cost quite a bit of money, even when you already own the property you want to subdivide. Anticipate costs associated with surveying, permits, preparing the site, adding infrastructure for utilities, consulting with lawyers, building an access road, and engineering services.

The overall cost will depend on the size of your property and the services required. Generally, though, you should plan to spend between $10,000 and $50,000. However, the actual cost could be much higher for your project.

If you don't have enough capital to meet these demands, you might need to secure funding from outside sources. Some options include working with a bank to secure a line of credit (potentially using your land as collateral to keep the interest rate as low as possible) and partnering with investors or other real estate developers to increase your capital.
 
It’s important to gather the parties involved in all aspects of the project to regularly meet and discuss details. Getting everyone in the same room can avoid unexpected costs and time delays with the goal of producing the best development with high absorption rates at a great financial return for all parties.

Return on Investment (ROI)
Once you know how much your project will cost, you can calculate your expected return on investment. To get your ROI, subtract your investment cost from your expected revenue. Then, divide that amount by the investment cost.
Your actual ROI analysis should include a complete breakdown with a list of individual costs and revenues.

A high ROI should make it easier for you to attract lenders, partners, and investors. Don't try to inflate your ROI, though, to look more appealing. Anyone serious about participating in your project will check the numbers and likely conduct their own ROI analysis.

The Land Subdivision Process

Once you have permits, approvals, and finances in place, you can begin the land subdivision process. You will need to hire several professionals—including surveyors, engineers, and planners—to subdivide the land accurately according to the plan and permits.
The results will give you preliminary plans you can submit to the county government for final approval. At that point, you can consider the land divided into the approved number of parcels, and you can start any developments you need to improve the land's value.

Get Expert Guidance Subdividing Land

Every step of the land subdivision process is critical to success. If you miss any detail, you could delay results for weeks, months, or even longer.

Avoid delays and other negative situations by finding a professional land consultant in your area.

If you are a land professional looking to build more competence in subdividing land, or buying and selling subdivision land, take the Real Estate Subdivision Land course through RLI’s Land University (LANDU). Offered virtually or in-person at one of our Chapters. View the upcoming course schedule for options.

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