If done right, you can maximize the profit on your land property with a smart, legal subdivision.
Property owners typically choose subdivision of land for financial reasons. A property owner with a large property may decide to subdivide and sell a portion of his/her land, to maximize the ROI per acre.
Property owners who are looking to sell a property may also research the market and find that they would stand to make more money per acre by dividing their lot. Depending on the market and type of buyer demand in area, there may be less of a barrier to sale if you are selling less expensive, divided lots rather than one large acreage.
The first step in deciding if your land might be worth subdividing is studying the local market. Determine estimated projections on how much your newly-subdivided lots could net on the market, using recently-sold comparable lots for price data. Try speaking to a real estate professional, who will know the in’s and out’s the area.
Consider your ultimate goals for the project, and understand the implications of size and scope. Generally speaking, larger properties and multiple lot divisions will incur larger costs. Keep in mind the adjustments that will be required to insure each lot has road access and utilities, as this is vital for strong resale value. The larger the project, the more likely it will require third-party help, potentially with municipal oversight in some cases.
Once you’ve decided that you’re interested in subdividing your property, you are ready to do the research to determine if it’s 100% possible per legal regulations.
First, check with a title company and HOA (Homeowner’s Association, if you are a member) to determine if any neighborhood covenants, local ordinances, or deed restrictions may block your plan. A title search will be needed to do your due diligence in this area. If you have not yet secured title insurance, this will also be important to identify and amend any pre-existing title issues.
Catherine Gilliland, licensed professional civil engineer at Vitruvian Designs and Engineering, tells an important tale about this step. “A friend purchased a building several years ago, which was constructed in the 1950’s. A larger parcel of land was subdivided at that time, and pieces sold to several different people. The problem is that her 1950’s sanitary sewer is crossing the adjacent property, and the old documents for the adjacent property do not provide a clear easement for that line.”
“The records and regulations at that time were not as strictly enforced as they are now. She is now having some difficulties gaining access from the adjacent property owner to repair this line and the city is not being helpful about this problem since she does not have a recorded easement document.”
Make sure that all easements for utilities and shared access are clearly defined and recorded, not only for new subdivisions, but for any new real estate purchase.
Next, you will need to contact the city zoning department. Zoning and property-development regulations vary considerably by town, so you will need to get confirmation from your local department on all of the rules. This may govern how the land can be used (e.g. residential vs. commercial, etc.). Some towns have impact fees that are levied for increased costs of servicing a lot with public utilities.
You may choose to hire an attorney who specializes in this process to help you along the way through final approval.
After you’ve affirmed eligibility, you are ready to move forward on a subdivision application. The local zoning department should be able to help point you in the right direction when it comes to this process. This may vary considerably for different states and towns across the U.S.
The subdivision will require a design by a professional surveyor, developer, or civil engineer. They will survey the property, assess the topography, and ideally ensure the land divisions are compliant with all regulations.
Catherine Gilliland says the type of specialist you hire will depend on the project. “If you are only dividing into two or three pieces, and all pieces will have easy access to an existing public road, the surveyor may be able to handle everything for you. If you want the lot divided into more than a couple of parcels, or if you need to add public roads and utilities, contact a civil engineer who has land development experience. They can help you with layout lots and roads, and will design grading, drainage, detention, and utilities for the subdivision. For large subdivisions and master planned communities, you will most likely need to have an architect involved.”
She offers a pro-tip as well to save you some money: “if you are planning any improvements (roads, buildings) in the near future, go ahead and get a topographic survey done at the same time to save money and time on the project.”
Once all of your materials are ready, schedule a pre-lodgement meeting with the local planning board and bring all your paperwork. The review and approval process by the board can take anywhere from weeks to months.
If you are denied approval, you have recourse with a zoning variance or waiver if necessary. This opens up a re-examination of the case. In some cases, the board may approve your subdivision, but only under certain circumstances or conditions (i.e. road access, or lot size).
After you have been approved, your land lots are officially subdivided and you will have separate legal titles for each lot. If you’re ready to sell the lots, we may be able to work with you under a wholesale arrangement.
If done right, your new land subdivision can be a huge benefit for your financial or real estate plans.