Blown Away by the Cost to Subdivide $$$$$

[Matt Fish]

I recently put a property under contract that was on a 1+ acre lot. I had a meeting with the country and they said that it appears that I am able to subdivide the lot into 3 lots - keep the existing house on one and create 2 additional. First, I would need to submit a minor subdivision plan to them for review. I had two firms come out to view the property and put together a proposal. Never having pursued a subdivision before, I had no reference for what the cost would be. Here was my thought process - get a survey, draw some extra lines on the plot plan, submit to the county and pay their fees to review and record = $3,000 tops. 

I am not sure I have ever been more wrong about anything in my real estate investing career. Both proposals were a few bucks apart and right around $40,000.  That's forty-thousand. My heart only just started beating again after reading through the proposal. Is this not insane? There is a price breakdown showing the various environmental studies that would be done, but am I crazy to be shocked by that number? Others that have never investigated a subdivision before, would you have guessed that amount?  Is this a comparable price to what others are seeing in other parts of the country?

Please let me know your thoughts and help bring some clarity to a situation that my brain just isn't able to understand. 

[Karen Margrave]

@Joel Owens is correct, the larger the project, the more lots you have to spread the costs out over, for both development and construction. 

One of the biggest problems for developing land is real estate agents taking listings and not understanding what goes into development and all the costs involved. Too often they, and sellers, look at the end price of a developed lot, and have no clue as to what it took to get it there, and all the costs involved. Not understanding those costs, they mistakenly underestimate them, and give far more value to the raw land than is reasonable for a developer to pay and still make a profit. 

What they need to do is have required education, etc. for agents wanting to list land that covers costs, zoning, etc.