Real estate investors and homeowners often divide large residential properties to make money. This process is called “subdividing,” and it means splitting up a large piece of land into smaller parts or lots. The goal is usually to sell or develop each small part separately. But, how you do this can be tricky and depends on where you live, local rules, and your property. Here’s a simple guide to subdividing a property:
Make a decision about whether or not to subdivide your property
Property subdivision is a common practice among land developers, builders, and real estate professionals. Yet, if you lack experience in this area, it can carry risks if you don’t thoroughly research it.
1. Research and Understand Local Regulations
Begin by reaching out to your local government or planning department to learn the zoning laws, subdivision ordinances, and land use regulations that affect your property. Keep in mind that these rules can differ significantly between different areas.
- The Subdividing Process: Subdividing a property involves dividing it into multiple parts, typically creating several residential units. This action often results in an increase in land value.
- Profitability of the subdivision: When you subdivide land into multiple lots, each can be sold to one or more buyers. This approach is generally more lucrative than maintaining the property as a single residential unit.
- Enhancing Land Value: Smaller residential lots are often easier to sell than larger pieces of land. This increased marketability contributes to higher land values.
2. Assess the Risks of Subdividing Your Property
Start by evaluating several key factors to determine if your property qualifies for a subdivision. This step can save you significant time and money, preventing you from investing in a subdivision that may not even be feasible for your property.
- Consider the costs: It is important to be aware that site development costs can accumulate quickly. Fees, permits, and other factors, such as site and soil conditions, development plans, and local fees and permitting costs, are included in these expenses. Additionally, municipalities may impose impact fees to cover community expenses like schools and infrastructure associated with newly built homes, which can sometimes be substantial.
3. Check the Minimum Requirements
Contact your local planning, zoning, and development offices to confirm whether your property qualifies for subdivision. You can also learn about ordinances or restrictions you must comply with. Check their website or call them to gather this essential information. This includes factors like minimum lot size, frontage, and the availability of essential infrastructure such as road access, utilities, and sewage systems. Keep in mind that as property size increases, the subdivision process becomes more intricate.
- Size matters: Subdividing a smaller piece of property (less than an acre) into just two plots is less complex than handling larger projects. Once you subdivide properties larger than an acre into three or more plots, the process becomes more challenging.
- Additional complications: Other factors that complicate property subdivision include whether the property has direct access to an existing public road. In addition, whether you plan to develop or enhance existing roads, utilities, and infrastructure. Depending on your site’s design and layout, a subdivision project can evolve into a comprehensive community development initiative.
- Check for restrictions: Start by checking for any local ordinances, neighborhood covenants, or deed restrictions that might impede your plans. Conducting a title search will help identify these issues, as well as uncover any outstanding liens or claims on the land.
Requesting approval to subdivide a property
4. Conduct a Title Search
- Find a Title Company: You can ask your real estate agent or lender for recommendations for a title company, as they often have trusted partners. The title company’s role is to perform a title search, ensuring that the seller has the legal right to sell the property.
- Title Opinions and Insurance: Once the title company completes its investigation and verifies the property’s title, it will issue a title opinion letter summarizing its findings. Additionally, the title company will provide title insurance, which safeguards the buyer in case previous owners or debtors make claims on the property.
- Title Search Details: During the title search, the title company thoroughly examines historical deeds to confirm that the seller is the sole property owner. This search also uncovers any outstanding debts associated with the property, such as taxes, liens, or loans.
- Conduct a Title Search: Perform a title search, typically conducted by a title company, to examine public records. This will ensure there are no previous owners with claims on the property. This search also helps identify unpaid debts, such as taxes or loans. If you’re purchasing the property for subdivision, make sure a title search is conducted before settlement, even if you already own the property.
5. Assess Market Demand
Assess the impact of subdividing your property on the market. It’s crucial to ensure there’s a demand for lots in your area and set a reasonable selling price. Research the local market and similar properties to determine the right lot size, layout, and pricing strategy that aligns with market trends.
- Seek Expert Advice: Consult a reputable local real estate agent with expertise in your area for valuable insights. Additionally, reach out to experienced builders who have worked in your region to gather their input.
- Consider Location’s Influence: Recognize that your property’s location has a significant impact on its current value and appreciation potential. Study the values of properties currently available on the market in your area, as well as those that have recently sold.
- Tailor Your Approach: For instance, if your plan involves subdividing the property to construct residential homes, analyze the optimal home and lot size that will fetch the highest value in your specific location. If most homes in the area are small, it’s unwise to build large, expensive houses on spacious lots, as they may not sell for a premium. Appraisers typically cannot assign a value to a home higher than the highest-priced home in the area. Therefore, thorough market research is essential to begin with the right size and price in mind.
6. Understand Zoning and Regulations
Before diving into property subdivisions, it’s essential to grasp the impact of local zoning and other requirements. Even if there are no specific ordinances or covenants preventing you from subdividing, your plans may still be affected by zoning laws, subdivision regulations, and property development statutes. These rules vary from one municipality or county to another and encompass factors like lot and building sizes, as well as open space mandates. To avoid complications, research these laws thoroughly before subdividing your property. In some cases, you can request zoning variances if your proposal is reasonable and complies with local regulations.
- Identify the Zoning Category: Contact the planning and building department of your township or municipality to determine which zoning category applies to your property. If this information isn’t readily available, you can often find it on websites such as State and Local Government on the Net or the Municipal Code Corporation (Municode).
- Consider Property Use: Recognize that zoning and local rules can significantly impact how you use the property. The neighborhood might be designated for specific purposes like single-family residential, multi-family housing, transitional zones, or mixed-use areas that combine residential and commercial elements. Understanding these classifications is crucial as they dictate what you can do with your property.
7. Ensure Proper Utility Services
Ensure that all your lots have access to public roads, water, sewer, and power. You cannot sell properties without these. You should confirm that these utilities are not only available but are also capable of handling the additional needs of the homes you plan to build there. It is sometimes referred to as site development or technical due diligence. It involves assessing the availability and options for key utilities and infrastructure, including power, water, sewer, and communications.
- Power Options: Consider various power sources, including traditional options like electricity and gas, as well as alternative or green sources like solar, natural gas, propane, heating oil, or geothermal. This is depending on your location and preferences.
- Sewer and water: Even if public sewer and water services are available, you may need to arrange to extend these services to your structures. Alternatively, consider options like wells and rainwater containment and filtration systems, especially in areas where public sewer service is unavailable. This may require a septic system.
- Communication Systems: Plan for the installation of communication systems such as high-speed Internet, telephone, and cable television by appropriately wiring the property.
8. Plan and Design for the Subdivision
To get started, engage a developer or civil engineer to design the property for subdivision. This plan will define how the land will be split, specifying the number and size of subdivisions, and it should detail how roads will connect to these properties.
Select a Firm with Expertise:
- Choose a reputable firm that employs civil engineers, land surveyors, and environmental consultants experienced in your region.
- The process starts with studying the land’s topography and identifying areas that cannot be developed due to critical resources. Using this information, they’ll create approximate property lines. Then, they’ll review local regulations and present you with concept sketches that offer different options for site development.
Consider Different Approaches:
- Open-space subdivisions prioritize open areas with shorter roads and reduced lot frontage.
- Mixed-use developments combine residential, commercial, and recreational zones.
- Affordable Housing Developments provide homes for low-income individuals but can also transform challenging or less attractive sites into profitable properties.
- Senior Housing blends open space with accessible recreation and condominiums, attracting new residents without straining local schools.
9. Survey the property
Check if your city or town offers surveying services; if not, hire a private surveyor or engineer. They will examine the property and create an accurate map that delineates subdivisions on the land. This map outlines boundaries, easements, flood zones, roadways, and access rights-of-way while providing the property’s legal description. Plats are mandatory for subdividing land.
- Budget for surveying: Surveyors charge hourly rates, which vary based on property size.
10. Submit Your Application
To begin the process, send your subdivision plan to the local planning or zoning department for evaluation and approval. This step may involve attending public hearings and discussions with government officials to address any concerns or make necessary plan revisions. Ultimately, your local planning board will decide whether to approve your subdivision. Remember to include your plat map, certificate of title, and the application fee when submitting your application. The decision may come during a regular board meeting or public hearing, depending on the circumstances.
- Pre-Lodgement Meeting: Beforehand, assemble your subdivision plans and request a pre-lodgement meeting with the local planning board. During this meeting, bring your title certificate and subdivision plans. Clearly Present Your Plans: Illustrate the extent of the property and designate areas for open spaces, existing and future houses, driveways, and parking. Once you’ve met the requirements mentioned earlier, it’s time to submit your application to the township or municipality. They’ll review and approve it, which can take a few weeks to several months. Stay in touch with the council to check if they have questions or need additional information during this time.
- Review by Urban Planners: The council’s urban planners will assess your proposal to ensure it aligns with local planning policies and guidelines. They often suggest adjustments or refinements to your plans to meet these criteria. Collaborate with Your Team: Work closely with your team of architects, land surveyors, and development planners to make the necessary plan modifications based on the council’s recommendations.
- Consider Planning or Zoning Variances: If your property doesn’t meet subdivision qualifications or your application is denied, you have options. You can file for a planning or zoning variance or waiver, which could reopen your case. Planning boards often grant exceptions when reasonable.
Understand Subdivision Costs and Pay for Subdivision of Property
Several factors influence subdivision costs. These include property size, location, intended use, and subdivision number. More subdivisions generally mean higher costs. It’s tough to pinpoint an exact cost due to numerous variables like location, property laws, zoning requirements, property shape, existing buildings, and access to utilities and infrastructure.
- Get a Cost Estimate: For a more accurate cost estimate tailored to your property, contact a local land-development firm with civil engineers, architects, and land surveyors who understand your area. They can provide insights into anticipated costs.
- Pay Local Application Fees: Include the local application fee when submitting your application to the government agency. These fees cover hearings, recordings, reviews, and tax-map updates. The amount, often up to $10,000, depends on your location and the number of subdivisions you request. Fewer subdivisions mean lower costs.
- Plan for Property Improvements: Approval for a subdivision typically entails property improvements like access roads, sewers, and utilities. These upgrades can significantly increase expenses, often reaching tens of thousands of dollars.
Conclusion
Keep in mind that subdividing a property can be time-consuming and costly, and it may involve legal and regulatory complexities. It’s crucial to work closely with professionals who understand local regulations and can guide you through each step of the process. Additionally, always consider the potential financial implications and risks associated with subdividing property. In addition, consider the market demand for subdivided lots in your area.
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