Need to know what you must do to subdivide a lot? - START HERE

[Bear Geiger]

I connected on BP with a person doing their first land subdivision. (1 parcel into 3) They sent me a message to ask a few questions and I thought other may benefit from what we discussed. Hope you find this useful.  - David Geiger

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My situation is that a family friend is selling their house, a 3 bedroom 2.5 bathroom house. The house is located in a low density zoning area (LDZ) and has a gigantic yard, .8 acres. I did some quick numbers and looked at the zoning laws and I can turn the house into 3 lots (it's a corner lot so it does work out).

I can tell that this is a great opportunity but I've educated myself primarily in multifamily assets in rural areas so I know very little about single family homes and raw land.

So I wanted to know the following.....

1. If you were in my position, what would you do?

Sounds like you have started by looking at the local rules and logistics. Great start. I love subdividing land because it can be very profitable with relatively little sweat, but it takes careful planning and patience. Figure out what you can do yourself and what you will need to get done by contractors. Unless the local rules require it, I would not involve a civil engineer except possibly to testify on your behalf (see next section). Another question is utilities. I assume this property already has power, water and sewar? If well and/or septic you will need to do some more DD.

2. Who/what type of people should I contact to make this deal profitable?

You will need a surveyor to define where the new lot lines are. A good surveyor can save you money and be a big help. They know all the steps it takes to subdivide property and may even interact with the town/county on your behalf. Don’t be afraid to ask them before committing…

a) how much will it cost and

b) what you can expect them to do.

In many cases the subdivision of property must go before a town council. If this is the case, do your homework and be prepared for any questions that come up. If you think they may ask how adding additional driveways in the neighborhood will affect traffic flow and safety, pay a civil engineer to come answer as an expert witness in the event the question comes up. This may cost you a few hundred dollars but could save the deal. Similarly, if you think someone will ask how this will affect the neighbor’s property value, have an appraiser come prepared to answer the question.

I don’t think your situation will require a septic system, but if you ever encounter this scenario, it is a good idea to find a good private soil scientist.

Finally, you will likely need a “sitework” company to put in driveways and culverts. Or you could opt to sell the lot as is for a lower price and skip the headache. Honestly, as a first timer, I would take the easiest path, pocket the money and get fancy later.

3. Any recommendations on raw land education? Chambersburg is a growing town and raw land is a good potential investment.

YouTube, Bigger Pockets, ask me and others. You should be able to make a 50% (or better) margin on raw land subdividing where you can just add driveways. If you have to actually put in roads and other infrastructure the margin will drop to 28% to 35% but you should be dealing with much larger sales numbers.

Here's the take away message ....
After you figure out all your costs, multiply by 150% (in case something goes wrong). Then figure out what the reasonable selling price for the lots are and multiply by 75%. If you can still make money, do the deal!