Real estate investors are creative intrinsically. They’re always searching for ways to create and add value. It can be rehabbing a rundown house or beefing up apartment complex rents. One less familiar creative technique to increase the value of a large property is subdividing land. principally, this creates “new” land—that you can then sell, build on, or rent. These new lots increase the value of the land and can severely raise your profit.
Once you say the word subdivision to individuals, it will most probably conjure up images of large tracts of suburban-style housing. Yes, extensive housing developments are indeed one type of subdivision, however, there are much simpler forms easily managed by even the most novice real estate investor… with some caveats.
First: Although it is profitable, subdividing land is not always simple. It can also be costly, with a lot of upfront costs. Despite these things, every investor needs to figure out what subdivision is and how it works so it can become a part of their real estate toolbox. Ensure to check out your local jurisdiction’s regulations and laws and consider every state and city is different.
What Is Subdividing Land?
Subdivision is rather easy. It involves taking one piece of land and dividing it into two or more tracts of land.
A subdivision may involve tracts of land with different ranges in size. For instance, from hundreds of square feet to hundreds of acres or only one new track. However, throughout the United States, there is not a standard legal “subdivision” definition. If you want to subdivide land, you should check your local rules.
For instance, in Tennessee, any division of land over five acres is not considered a subdivision, unless you’re in Shelby County, where the standard drops to four acres. And if you’re installing roads or utilities, size doesn’t matter.
Dividing land can be done simply; however, an easy subdivision isn’t always legal. commonly, writing a legal description of the two tracts, recording a deed at the local court, and submitting a certificate of title divides the land. However, consider your jurisdiction’s subdivision rules and ordinances, as well as any deed restrictions that may affect your plans. Skip the necessary steps, and the building department will give you the boot when you apply for a permit.
Why Subdivide?
People usually subdivide their land so they can sell off a portion. You may want to subdivide land for your family. Or maybe you want more lots for a house or commercial development.
Therefore, subdivisions create new tracts of land and some people prefer to subdivide.
How to Subdivide Land (Legally)
Before subdividing, check your local zoning. You’re searching for the minimum lot size.
Rezoning of some properties doesn’t technically qualify. If you want to make sure please apply for a zoning variance or waiver and the government sometimes makes exceptions.
Assuming you’re permitted to subdivide, the precise process depends on your local jurisdiction and your project’s difficulty. For a relatively simple subdivision, for example, splitting a two-acre lot into two one-acre lots needs to have a plat drawn, approved, and recorded at the courthouse and pay an application fee, which varies depending on local regulations.
What Is Subdivision Platting?
If you want to know plat even for simple projects, hiring professionals like civil engineers, architects, land surveyors, and environmental consultant is essential to ensure your project proceeds as planned. Providing more information increases your chance of approving your proposed subdivision. Such pros can finally lead to crate plat. This word is a fancy word for a map or subdivision layout and an engineer or a surveyor can draw it. Each plat map will show a lot or subdivision that you decide to create from your parcel of land. Every jurisdiction mandates what a plat map requires to depict, such as utilities or streets. Therefore, please pay attention to local regulations.
But there are other issues like if subdividing is not so simple, dividing 10 acres into 20 lots, or installing utilities and constructing new streets.
Usually, you begin with a preliminary plat. The Planning board or the local governing officials will check your design. If it is ok, they grant approval or ask to modify it.
After approval, you will continue an engineering review of your offered subdivision’s construction and infrastructure plans, covering all issues from drainage patterns to sewers and road design and utility construction. A licensed engineer can help you in this step by drawing detailed plans designed. This task is not for average real estate investors.
After that grading the land, constructing the streets, and installing the utilities is necessary. Then, submit a final plat that shows your lots waiting to approve and record at the courthouse. After recording it is time to begin selling lots or other plans such as constructing buildings.
How Much Will Your Subdividing land Project Cost?
After paying the application and recording fees, a survey and a plat are the minimum things you require. The minimum cost of a simple subdividing of land is under $2,000. Almost all subdivisions need some type of utility installation, and some of them need road construction.
Encountering other costs such as school impact fees also are available. Depending on your jurisdiction such costs can increase to tens of thousands for each lot. Please pay attention to earn a return on your money. You need to pay all of such costs if you want to sell any lots.
Surprise Subdivision Headaches to Watch Out For
There are common subdivision problems that each smart real estate investor must familiarize themselves with them. We highlight some of them.
- Raw land: Developing raw land usually falls under subdivision rules. Hiring an engineer or local surveyor is helpful to guide you if they are familiar with local rules.
- Extra lot” properties if you buy land with an extra lot attached, you need to ensure this extra lot was correctly subdivided and it is legal to build or construct the property.
- When you encounter non-conforming lots in older parts of town, the time of creating them is important, if that date is before subdivision rules were enacted, then your lot is likely grandfathered. However, If there is no plat recorded and they were created after enactment it is possible you have an illegal subdivision.
- Land swaps: Please pay attention that swapping small land always doesn’t evade subdivision rules. Swapping ownership of your 10-foot driveway for 100 square feet of your neighbor’s land for parking may be surprisingly complicated.
You need to check with the regulations of the local office to record deeds.
- Public hearings: Sometimes neighbors don’t satisfy your plans. when any zoning changes local laws need a public hearing, it is possible they interfere. Therefore, your neighbors must hear about your plan directly. Community management is a vital part of due diligence. If you think some neighbors are not happy, it is better to talk with them before taking any action.
In conclusion
Subdividing land is not as quick and easy as you may think. Approval for simple subdivisions can take from a few weeks and for complex ones in jurisdictions can extend to years. Also, you must observe lots of development regulations. But despite the all costs and time involved, it is quite beneficial and consequently, it is a good investment.
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