Land Subdivision Process

Buying & Selling Real Estate
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Land Subdivision Process

Nick Burkhardt
ME · Member since 2017 · 29 posts · 12 votes

BP Land Developers/REI,

I'm trying to understand how a potential deal would work and need some help/advice on buying raw land and subdividing lots off of it and then building my dream business (Biergarten/Wedding Venue). I have a deal in mind...

Part 1
$220,000 for 46 acres, some of which over looks a beautiful lake in Maine. There exists a master plan (which would need to be tweaked for my idea - read on!) for ten 1-1.5 acre lots. There is a rough cleared road, but no actual road/water or electricity. My first question is if I put down 30% to secure the land (66K - all my capital), could I immediately begin selling the lots?, taking the profit and using it to build the road, bring utilities to the lots etc. Basically just do one lot at a time? My market demands about 60K for a 1-1.5 acre lot. Assuming each lot requires 20K to develop (is this a decent estimate?), say the first lot sells, I develop that lot and 2 others. Those 2 sell and I have 120K to develop the next 6 lots. Those 6 sell and I develop that final lot for 20K out of my 360K profit. Leaving me with 340K profit. Does this all sound possible? What am I forgetting?

Part 2
I've used 15-20 acres on the subdivision and now have the capital necessary to develop my dream business of owning and operating a biergarten/wedding venue. The open air pavilion would look out over the lake and the biergarten would serve as the reception space when weddings are booked. I would do much of the clearing and building myself as my family owns a construction company, but I would basically just build as much as possible for the 340K on the remaining 26 acres of land.

Is this possible in the order I've laid out? Thanks so much!!

-Nick

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    6y

    Not likely....to subdivide you’d have go through the application/approval process with whatever the building and zoning dept is called there. You likely couldn’t get final plat approval, and have new legally subdivided lots eligible to sell Until an acceptable toad is in.....let alone trying to people to buy with no toad or utilities. 
    First step is to sit down with the local government and see if the subdivision is possible and what Exactly would be required. 

    1Reply
  • Nick Burkhardt
    OP
    ME · Member since 2017 · 29 posts · 12 votes
    6y

    The Subdivision is possible and there are plans already made showing 10 acceptable 1-1.5 acre lots. I guess I'd have to take another route and find an investor (I have one in mind) to develop the first, say 5 lots at 20K (estimate). Total 100K at a 40% return, he makes the first 140K and I take the remaining 160K to develop the remaining 5 lots... another 100K. Total profit: 260K

    Is that more reasonable? Set aside Part 2, say the Biergarten/wedding venue was or wasn't approved. Does the process make more sense now?

    Thanks!
    -Nick

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  • Barry Ruby
    Developer · Boulder, CO · Member since 2018 · 530 posts · 365 votes
    6y

    Hi Nick, 

    Your 1st priority should be to run a preliminary analysis to see if it works for your intended development plan. Part of that analysis should include a critical path to determine the the time, milestones and cost associated with proving the project "on paper". Be sure to include the time and cost associated with "tweaking" the existing master plan.

    If the project looks like it works on paper, your 2nd priority should be to place the property under contract using the critical path and budget you created by doing the analysis described above. The Closing Date on the property should be tied to a point in time that has the property and project you envision fully entitled in a manner that will allow for the development and operation of the project AND when you have secured 100% of the debt and equity capital needed to develop your project.

    Your 3rd priority should be using the time provided in the purchase contract (from mutual execution of the contract to closing) to conduct all of the due diligence activities cited in the critical path and any others you may encounter during the DD process.

    After Closing, your 4th priority should be to develop the horizontal improvements (roads & utilities) to produce finished lots and to then sell the lots to 3rd parties and use those funds to cover all or part of the cost to build "your dream project".

    If you are interested in taking on Priority 1 (critical path and budget) DM me and I will send you an Xcel worksheet that can get you started.

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