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

32 Replies

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. 

We subdivided  property a long time ago and I thought it was expensive at the time but can not remember much other then paying a survay company  and I am not sure whether we had to have an enviormental study.

Everything must be negotiable why don't you just call up another survey company or two and get another price or two.  Why don't you research it on the internet? and find out just how reasonable or unreasonable the price is??  I assume you have called the county and asked them for some advise or names of companies.  I think we used the original survey company on our original house plans.

@Barbara G. Yup, I do plan on getting more estimates, but even at half the cost of the current estimates, it would still be 7 or 8 times more than my highest guesses. I am curious to know if other places across the country are more/less than here in the Delaware / Philly area of the east coast. 

I am in Maryland , near annapolis , in my parts thats a cheap price .  Engineering companies arent cheap.   The next thing is if you get a loan on the property is dealing with the mortgage company . 

@Matt Fish I don't know anything about your part of the country.  However; in California we don't have to do a "subdivision map" which here is recorded with the State and needs to have State approvals, unless the subdivision is over 4 lots. Fewer than that is a simple lot split. However; because it's simple, doesn't mean it doesn't cost a lot, especially in California. There's civil engineering soils engineering, and if needed environmental impact reports, etc. Did you talk to a civil engineer? They can usually handle everything. 

Be glad you are not in California. I have a friend that is spliting 200 acres into ten acre parcels and 75 acres into 5 acre parcels. and he has to do perc and mantels on all of them and have a well drilled for each of them. 

$40K sounds about right. Good luck.

Here in Mobile that would cost about $3k at most. I did a very similar subdivision (less than 1 acre) into 3 lots and tore down an old shotgun house. My total costs for everything including tear down, permits, survey etc was less than $5k. Took about 90-120 days for approval. About 7 years ago. YMMV

@Karen Margrave Hi Karen. Thanks for the insight into CA. Yes, both companies I have worked with so far have been civil engineering firms. As far as I know, they are the only ones qualified to do all the testing - soil, water, traffic, etc. - that is required. 

I wonder at what point all these tests became necessary. 

@Jared Irby Wow Jared, that is great. At that price, I could fly the whole company that worked on yours to Delaware, pay them to do the subdivision, and fly them back for far less. haha. 

Originally posted by @Matt Fish :

@Jared Irby Wow Jared, that is great. At that price, I could fly the whole company that worked on yours to Delaware, pay them to do the subdivision, and fly them back for far less. haha. 

 @Matt Fish Haha. I'm sure some of the cost has to do with many other variables. Higher permit/impact fees, soil samples, perc tests, engineering and God knows what else. Here it was very simple. Survey with the new lines drawn on it along with a very simple application and a small fee. Also I believe we had to send certified mail to all property owners within 3-500 ft of my property with the meeting date. It was smooth and simple. Good luck!

Wow... I am shocked too... I guess that it just the cost of doing business in your area.

Is there a magic number that requires that much work and expense, say 3 lots and above? Point is, what if you subdivided the lot into two, does that change the numbers drastically? Just a thought. 

@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.

So what's the difference between a subdivision and a land split?

Originally posted by @Paul Ellis :

So what's the difference between a subdivision and a land split?

I can only speak regarding CA but here there are two types: a parcel map (4 lots and under) or a subdivision map (5 or more). There is a lot of work that goes into each. I would expect $50k or so here in CA and at least a year probably 2 to get through the entire process on a straightforward project.

@Matt Fish  Matt don't be shocked.. @Karen Margrave  as others have stated in most jurisdictions just recording a map that a surveyor draws up went the way of the Dodo bird years ago.. the only reason your shocked is because you probably never looked into this before.. now you know.. and if you have two reputable firms giving you basically the same bids then thats what its going to cost. 

Remember in the last 8 years or so in the melt down not many developers were prosecuting land divisions.. so the cities using the free time used it to go through and up date their codes and such.. We have run into this in Oregon this last year

what use to cost us 25k a lot all in to develop is running 40 to 45k.. And Karen hit the nail right on the head.. the sellers of land are thinking it should cost 10 to 15k and price their dirt accordingly and sellers of course are usually way out their in what they think there land is worth many times discounting development cost all together.

So on the one I just broke ground on in Oregon 27 new homes.. my initial budget for under ground all in was 27X25 = 675k it ran over 40k and we had to come out of pocket almost 400k in over runs... now we will still make a nice spread on this as the homes have gone up almost the same amount.. 

So to that end It just dawned on me this year that I will not longer work on little 2 and 3 lot deals. takes too much time and brain drain.. my minimum now is 10 to 20 units with 30 to 50 being ideal.. the numbers are bigger but all the same things have to be done as doing the little projects but you get more mass and scale.

So end of the day budget in the 40k and use that to calculate what you can pay for the dirt share the cost with the seller and sellers agent etc.

@Paul Ellis  the difference between a land split and a subdivisions in pretty much any place I have worked is the subdivision Map act come into play at 5 lots or more.

4 lots are less are what typically call a short plat. and exempt from the heavier rules and regs that a subivision falls under..

has to do with many different things.. including different types of traffic studies.. storm sewer, water , sewer , schools, parks ,  fee's in lui  ,, soils  etc etc

@Stephen Haynes  Awe I had not heard the term perc and mantle in years thanks for that tid bit.. it used to be you could put a perc test between every 2 to 5 lots and that would suffice and or drill a few wells but not on all lots..

this goes to the practice years ago in many areas of never doing any of this and creating literally thousands of parcels that can't be built on with the new codes.

You see these parcels come up for tax sales all over the US.. jurisdictions these days only want to create a parcel they know can  be built on

When Boise Cascade built the 27 mega rural subdivisions in CA.. ( Pine Mtn Lake, Lake Wildwood, Hidden VAlley and that one just south of Sac)  they were allowed to plat 3 to 5 thousand building lots with no perc's and put a water system in that maybe could handle 1/5 of the houses to start leaving these communities to have to enlarge the systems out of their own nickel in the proceeding years.. leading to all sorts of building moratoriums and folks paying taxs on lots they could not build on.. there are still hundreds if not thousands of these lots that are still non build-able because of perc requirements.

@Jay Hinrichs you mentioned perc, another hindrance to splitting any lots in somewhat rural areas where there is septic, etc. is that "wet weather testing" is often required. That means putting test pits in the ground and measuring throughout the "rainy" season that must get a specified amount of water in them. In California, there has been no rainy season for the past several years that have dropped enough water for the testing, therefore; it stops the splitting of the parcel. In some areas they will allow different types of septic systems, but not all areas allow them. Also, as to the lot split, I meant it was simple in that under 4 lots doesn't require a subdivision map be filed with the State, etc. 

@Matt Fish , be careful that you don't miss any hidden costs. I started a lot split (1 parcel into 2) expecting that the City would allow me to connect to the sewer the same way the previous house was tied in (to the rear of the lot). The County Drain Commissioner thought that was fine but the City Engineer refused to allow this even after speaking with the County Drain Commissioner. (The City Engineer has final say in this area.) There is a gap in the sewer line in front of the property that extends for 4 houses--the City Engineer insisted that I must complete the sewer in front in order to complete the lot split (an additional $40K or so expense). I can build a single house and tie in the way it was but they will not allow the split without completing the sewer line in front. (Oh, the neighbors on both sides are tied into sewer to the rear. I would have to tear up their front yards and driveways and then repair them to do this and they won't even use the sewer access.)

I'm a professional land surveyor in Alabama and do these all the time. Post a copy of the requirements for the city approval and I can tell you what your actually paying for and what those costs would be for my area. That's probably why your seeing prices of all types because the project scope may be so varied. 

Clint

@Karen Margrave  ah yes the wet weather perc.. Sonoma county is famous for those.

I just closed on two lots I owed out at Jenner by the sea  ( I sold them) try as I might I  could never get a system approved. with an approved system they were 250k lots.. with no approval I sold for 50k so the buyer could simply park his RV on it a few days at a time

That number is insane they are ripping you off because you are new. 

A survey for a piece like that unless its the most dense woods in the world should be around $3k-$5k, throw a few more bucks on to draw up lot lines etc. 

Construction related costs are naturally more, but for a simple subdivision they are smoking dope at $40k. 

Forget about the environmental stuff unless this is a large commercial deal.

I wish I was smoking dope, but it is true that the costs can vary greatly from location to location and what is included in the quote. I only speak for CA, here is an example of a tentative map application which is required to do a lot split here. Application fees alone are $9k, it goes up to $14 if you want to do 5 or more lots. You still need to pay your civil engineer, soils engineer and land surveyor plus plan check fees, filing fees, etc.

Take a close look and talk to the city about what is required in your area make sure to account for everything.

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