Inherited 50 acre land...got questions.

[Franklin Lee]

Hi all,

Well, for the most part, I've inherited only 15 acre of land in a rural area. It's a good, nice, country area that is only about 1 hr away from Washington D.C. Thought maybe I should invest by developing 15 homes on those 15 acres.

Now, I know developing is a whole new ballpark than what I've been studying...but I do see some potential in this category of real estate. The median price in this area is around 250,000. So far so good.

The developer, thank God they're in Richmond, VA, I'm referring to has some really good homes that are around 80,000 dollars. You can look them up here. http://www.lockridgehomes.com/Gallery.aspx

Now, here's what got me thinking. I've checked the FAQ section and it said that there are no hidden costs. Everything is paid for...but when it comes to "Owner's Responsibilities," I got kind of displeased. Does it mean that you have to pay for permits, zoning, porta potties, etc? If so, how much would they cost? What would that add to their home costs?

[Bart Pair]

Franklin,

I have to say everything I have read on this thread scares the hell out of me. You could be getting a very expensive lesson in development if you aren't careful. (Don't mean to be harsh, but my being blunt now could save you $100s of thousands of dollars).

Home builders, like the one you link to, generally do nothing more than build the house on a "Pad Ready" lot. They don't build the roads, run the utilities, do the subdivision permitting, handle the stormwater design, environmental issues, zoning, grading, or anything else that goes into building a residential subdvision.

There is a huge amount of expense involved with getting a site "pad ready" for a builders like these and unfortunately there are no "rules of thumb" that are going to let you quickly estimate what this is going to cost.

You have a lot of due diligence to do my friend before you go down this road.

For starters,

Is the land even zoned to build these single family homes on it? (And by the way, if it is zoned single family 1 unit per acre, odds are you won't be getting 15 single family lots on 15 acres - the roads, and stormwater requirements alone will eat into this significantly. Add recreational areas and other things that many local cities now require for subdivisions and you may only get 10 or 11 lots.)

How far away are utilities from the site? If you don't have adequate water, sewer and electric out in front of your site than you may have to spend a lot of money just to get it there.

What impact fees will your development have? Many cities and counties went crazy during the boom implementing huge impact fees for schools, treatment plants, roads, parks, etc. I have seen areas where this added an extra $5k - $15k to the cost of each lot.

Is the site even buildable? Are there wetlands on it? Does it have easements or other encumbrances that prohibit building on all or part of it?

I could go on and on, and I haven't even raised the question of who is actually going to buy/rent these single family homes once you build them.

Yes, I am trying to scare you a little Franklin - not because I don't think you should go into development, but because I want you to make sure you don't have any nasty surprises down the road when it is to late.