Subdividing Land: Tips for Landowners from a Developer

(Part 1 – Evaluate)
Learn to evaluate the risks and rewards of subdividing land into residential lots. In
this first of three articles on the subject, a developer and real estate lawyer provides
landowners specific items to evaluate when considering whether or not to subdivide
land. Come back for the next articles in this series that provide insights for
landowners based on the author’s real world experiences with the subdivision
process, as well as a hands-on description of the steps landowners should take
when subdividing land.
Why Subdivide My Land?
Sub·di·vide (v.): to divide into several parts; especially: to divide (a tract of land)
into building lots.
Successfully subdividing your land into residential lots can have many benefits,
including providing a landowner both increased profits and flexibility. If you are
buying or already have a large parcel of land for sale, or even a home lot that has
“extra” land area, you may wish to consider whether subdividing your land can help
you maximize your real estate resources, something that many landowners are
evaluating in the current market conditions.
More Lots May Mean More Money
Depending on the situation and the local market conditions, you often can increase
the total value of a parcel of land by subdividing it into smaller pieces –lots – that
are then sold to one or more buyers. In essence, through subdivision the parts can
be more valuable than the whole.
Save Some Land for Yourself
Another benefit of subdividing for homeowners who would like to liquidate some of
their real estate without having to sell the farm (literally), is that they may be able
to both cash in on a portion of vacant land and stay put on the rest. Holding onto
some of their land can give that property time to increase in value as the
surrounding subdivided land becomes developed.
Increase Marketability
In addition, landowners may more readily find buyers for smaller subdivided parcels
that are more affordable than one larger piece of land. Try to understand the
market’s needs. Completing the lot subdivision up front saves the purchaser the
time, effort and risk of doing it themselves, increasing the salability – and often the
value – of the overall property.
Evaluate the Feasibility of Subdividing Your Land

as well as construction of roads. The level of difficulty – and expertise needed — can be compounded if you have a site where lots will not front on an existing public road or where utilities and infrastructure must be built. This likely will require you to undergo municipal oversight (possibly even state or federal. the complexity of the subdivision process can rise dramatically. Be thorough during your due diligence and planning so you can evaluate whether subdividing is feasible and makes financial sense. If you are dealing with a single lot being subdivided into two or three residential lots. the risk that a subdivision is not able to be done – or at least done in a way that makes financial sense – can often cost you money and valuable time. the bigger projects are best left for the pros. often the greater the complexity. In short.) Larger may be Complex Once you get over about an acre in size and two or three lots. In fact. you basically are stretching the activity from simply subdividing a parcel tofull-scale community and land development. Whether you own the land or are just evaluating a potential new purchase. subdividing land really is a fundamental part of all real estate development. Guidelines for the Fearless Subdivider If you are interested in subdividing a parcel to increase the value or use of your property. because there can be different degrees of difficulty when subdividing land and. to put it simply. we wish you luck – and provide you the following recommendations: . utilities and other infrastructure. and – as always – plan to seek the guidance of experts. Smaller may be Simpler So you think your land is a candidate for subdividing? You need to consider the size and scope of your plans. these can align with the project’s size – the bigger the project in acreage and number of lots. There are a number of preliminary items that help you decide whether a subdivision is feasible. In this scenario. you may be able to handle this by working with a few real estate professionals that will help you in the process. If you are a landowner or homeowner considering subdividing land into vacant lots. but it is only one part of the overall development process. land developers and real estate agents.Subdivision concepts are common knowledge and practice among experienced professionals like home builders. (More on this in a minute. Subdividing land also can be risky and costly if you are not thorough with your due diligence. for some situations) for the subdivision’s site design and layout. read on to learn more.

Check for Restrictions! One of the most important first steps before subdividing your land or land you wish to buy is to make sure there are no restrictions that will block your plans. Review these items carefully. If you find items during your review that may be problematic. Sizing. you and your experts also should research the local zoning. You also may be able to get some advice from builders – reach out to the ones who are active in your geographic area and in the price range for new homes that would likely be built on your lots. or see if you are able to get title insurance that provides specific coverage to protect you and ultimately your buyers. subdivision and development laws so that you can understand the layout and size limitations for your planned lots. Everything from ordinances. But never ignore a tricky restriction or convince yourself that it won’t be a problem. even the pros can get into trouble if they become too wedded to their grand plans. Each county. neighborhood covenants to deed restrictions may prohibit – or fatally complicate – your plans. buffers. setbacks (front. Selling lots is not like Field of Dreams.” You need to make sure there is a market for lots in your area and at a price that makes sense. A good real estate agent with expertise in land can help you with this. Understand Lot Layout. plus order a professional title review (typically through a real estate attorney) so that you can understand whether there are any deal killing issues that apply to the property and prevent subdividing. You may get away with bypassing restrictions for a while. rear and side). Beware. but doing so can cost you down the road – especially when trying to sell or finance the property. but for the market. make sure your proposed lot layouts and lot sizes are appropriate and will work not only legally. . building heights. layout and other requirements that are expected for new lots to be marketable. Services…and the Market When subdividing a parcel. minimum lot widths. required open space and other significant details that affect the size and layout of your lots. you and your attorney should evaluate them carefully to find a solution. We’ll describe more of these real-world risks in the second article. Even if you’ve confirmed that there are no restrictions that forbid subdividing the land (or make it unfeasible). where “if you build it they will come. Getting their input could be the key to successfully subdividing marketable lots. Determine the size. city or other authority will have its own regulations that describe important items like current zoning requirements.

where we will describe some real world issues that we have seen in subdivision attempts. using a dirt road as your lots’ access will not compare well to a nearby lot on a paved road with sidewalks. utilities or other services that are less than normal for the market – so even if it is allowed by law. Do your research and have your surveyor locate water. power and other utilities available. Evaluate these items carefully in advance and include the related costs in your financial analysis and budget. electricity and other utility lines and infrastructure on your plan. but others will be driven by the market. gas. impact fees and other assessments when adding the new homesites. consider the negative effect of providing any infrastructure. Most homeowners expect to face a public road (with adequate frontage) and have water. sewer. curb and gutter and even to plant trees. . the third article in the series will provide handson details about the steps to take if you decide to subdivide your land into lots. We hope this helps provide valuable insight for landowners about the pros. undertaking a subdivision can trigger a new set of impacts and requirements. Understand Impacts & Other Requirements Another surprise to landowners attempting to subdivide their land is that the act of subdividing can raise any number of additional requirements and costs on your land. You will need to keep items like these in your budget too. sidewalks. Many of these lot size. Other rules may require you to build or improve roads. layout and service matters will be driven by the local requirements. you also may be required to install water and sewer connections and meters for the lots. cons and items to evaluate when considering subdividing your land.  Likewise. In addition. While your existing parcel may have been grandfathered so that it does not have to comply with some newer laws and regulations. These can include a requirement that you dedicate part of “your” land that is in the road right-of-way to the local government. sewer. Check back soon for our second article in this series aboutSubdividing Land: Tips for Landowners from a Developer. or to pay capacity fees. causing you now to be working with a smaller parcel. Plus. you may not want to create a subdivision that results in narrower 45 foot wide lots – even if you can. So be sure to confirm both that typical utilities are available for your lots and that they will have the capacity to handle the load from any new homes that would be built on the subdivided lots.  If builders and new homeowners only want to buy 70 foot minimum lot widths in your area. including contingencies for some which may not be known upfront.You also need to confirm that each of your planned lots will be properly serviced.

but after some due diligence we discovered an 80-year-old deed restriction that would prohibit subdividing the land. That same developer still owns the undeveloped parcel after more than 4 years. Even though the subdividing homeowner had already paid to formally have the subdivision done through the municipality. you can learn about subdividing land from the real world experiences of a real estate lawyer and developer. Six months later.  Providing you the flexibility to keep your home. not every opportunity should be pursued by landowners and sometimes even the pros learn lessons the hard way. 2) Homeowner Violates Covenants: In a planned community with large homesites. In a phone call with the new owner/developer. and that applied to their property and prohibited subdividing lots in the community. Sometimes a small-scale subdivision can be done by a landowner easily and successfully with the help of a just a few experts. a large sign was installed on the property offering multiple lots for new homes. a homeowner decided he wanted to subdivide their 2-acre lot to keep their existing house on a smaller lot and to sell the second vacant lot to someone for another home to be built. some of the benefits may include:  Increasing the total value of your land. but still get income from selling your extra land. But.Are you a landowner who is thinking about subdividing your land into residential lots? In this second of three articles on the topic. The other homeowners on this cul-de-sac. as we described in the first article. but there was no way to get around it. As noted in that article. They and the HOA used the covenants (and a lawyer) to put a stop to it. So we walked away. Here are just a few anecdotes from some of our real world subdivision experiences: 1) Deed Restrictions Cost Professional Developer: We considered purchasing a large parcel of very desirable property to build a high-end infill housing development. weren’t happy with their neighbor’s plan. The homeowner failed to carefully review (or ignored) the Covenants. Be sure to check out the first article in this series that describes the common benefits and risks of subdividing your land. thanks to the CCRs the subdivided building lot was illegal and would . Conditions and Restrictions (CCRs) that were in the land records. it came to light that he was not aware of the deed restrictions against subdividing and had already purchased the site. also situated on 2-acre lots. We evaluated it thoroughly. or  Boosting the marketability of your land. The sign came down a few weeks later.

due diligence costs and negotiations with a downhill neighbor. And. Unfortunately. because you cannot control the timing of the local planning authorities. but the smaller lots that would have been created by this subdivision would require new municipal water and sewer service. the issue of a right of way for the sewer to service the “new” subdivided parcel(s) was not able to be resolved. We’ve had great success using these strategies. the inspection period and/or closing date generally should be extended automatically until you have the subdivision approvals you need to close. Homes on larger lots in some areas can be serviced by their own well and septic system (as was the case here). . effort. and then rent. First subdivide the land to create additional vacant lots to sell.  Investors can look for houses on large lots that can be subdivided.never be able to be sold separately. consider purchasing all or part of adjacent parcels. combining the parcels may allow you to create three or more lots. your contract should list official subdivision approval as a required condition for closing – failure to get your approvals should allow you to terminate the purchase agreement. 3) Subdividing May Require Additional Infrastructure: One of our team members was considering a large suburban homesite for subdivision and development. Here are a few tips to consider from our experiences – subdividing tricks of the trade.  When purchasing property to subdivide. We hope these lessons from the field have been helpful. sell or demolish the existing home that is now on a smaller lot. And. We have found that the market often values the home about the same. after much time. Do you have any interesting subdivision-related stories to share? Come back soon for the final article in this series on subdividing land that will walk you through the typical steps of how to do a small-scale subdivision.  If you find a lot or land that you want to buy. if you will – that may help your subdividing efforts be a profitable tool for you. So the value of the new subdivided lot(s) can be a nice bonus for your investment. as these real world scenarios can highlight some things to consider when subdividing your land. Subdividing Tricks of the Trade Subdividing land can be a lucrative undertaking when done properly and in the right circumstances. but don’t like the way the site is configured. in some cases. The homeowner lost all their expenses related to the subdivision. You may be able to combine the parcels and subdivide the land with new lot lines. even though it may be on a smaller parcel. The deal fell through.