Buy/Rezone/Divide Raw Land - Suggested Reading and Guidance

Commercial Real Estate Investing
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Buy/Rezone/Divide Raw Land - Suggested Reading and Guidance

Michael Spindler
Aspiring MFR Investor - Kansas City, MO · Member since 2013 · 79 posts · 7 votes

Hi BP,

Regarding raw land - zoned AG. Does anyone on this site have experience with buying, rezoning and dividing land for residential SFRs/MFRs (2-4)?

Before buying, is it wise to speak with a lawyer specializing in local zoning laws? And to evaluate the property first?

Can anyone recommend a book(s) specific to this type of investing? Would you be willing to share your process, system, or other outlined formula that you follow?

Projects this large would require OPM. Would any book on writing a proposal/business plan work? And if so at what stage of the process? i.e. Do I hire and pay the lawyer, as to feasibility and a summary or other report to market to other investors? Or do I need to secure the property first with a contingency and then the mad dash to pull everything together?

In addition to dividing, do you need to put in the infrastructure, before you can sell to a builder? i.e. roads, sewer, water mains, etc...

I appreciate any information and direction you can provide.

Best wishes.

Michael

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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y

Michael Spindler I cannot imagine an area of the country where in this market, there is a high enough demand for housing that rezoning AG land would be feasible. IF you are in such an area, you will need to check with your local planning department in regard to the process. Every municipality is different.

Also, aside from the local regulations, you can go on to your states real estate department website, and look up subdivisions. There is a host of criteria for submitting for approval.

Once everything has been done and submitted to the State and approved, then either you as a developer can put in utilities, streets, curb, gutter and sidewalk and sell finished lots to a builder, or you can sell the approved subdivision to a builder, and they will do all of that.

It's a very long, complicated process. If you have never done it it's not something to cut your teeth on.

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  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    13y

    Michael Spindler I cannot imagine an area of the country where in this market, there is a high enough demand for housing that rezoning AG land would be feasible. IF you are in such an area, you will need to check with your local planning department in regard to the process. Every municipality is different.

    Also, aside from the local regulations, you can go on to your states real estate department website, and look up subdivisions. There is a host of criteria for submitting for approval.

    Once everything has been done and submitted to the State and approved, then either you as a developer can put in utilities, streets, curb, gutter and sidewalk and sell finished lots to a builder, or you can sell the approved subdivision to a builder, and they will do all of that.

    It's a very long, complicated process. If you have never done it it's not something to cut your teeth on.

    1Reply
  • Michael Spindler
    OP
    Aspiring MFR Investor - Kansas City, MO · Member since 2013 · 79 posts · 7 votes
    13y

    Karen Margrave Hi,I hope you are well.

    In the area I was looking and most of the Northland (Kansas City North) for that matter, the past decade has seen a lot of new retail construction and redevelopment. In fact, the old Metro North Mall (big box with lots of retail) is in the process of a major $200M redevelopment, should be finished around 2015. The KC Business Journal article also mentions nearly 70,000 new residents to the area. This alone I can see in my daily commute in just recent years.

    All that aside, you are spot on... I really need to research the numbers and check to see what local governments have in mind for infrastructure. If anything, for practice and to get a better picture of my market place and pinpoint where in the cycle we are.

    As you suggest, admittedly, this scenario would be a bit large to cut my teeth on, alone. Can you recommend a course of action as a doable starting point in commercial, to "grow" me into being able to do the above?

    What I am beginning to love about commercial is that it is not about me, but my vision and the deal on the table.

    Thank you for taking the time to reply. Have a great evening.

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  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    13y

    If you owned the land, free and clear, then .. you could find an experienced developer that would want to come in on the deal. As with everything, you have to take a good look at all the pieces of the puzzle, as each has value, then look at what value you are bringing to the project. If you don't have cash, you need experience or some other talent that has substantial monetary value in the project.

    If you don't have any of that, and want to learn development, start small, and learn the ropes, or go to work for a developer. You probably can find online classes for construction management and development. Development is a very complex beast, and the larger the project, the more pieces to deal with.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Hi Michael,

    Just the other day you were asking calculations about an existing apartment complex.

    Since you are new to this I would really stay away from ground up development. I worked with commercial developers on assembling huge projects for years. There is so much that goes into it.

    2 main questions:

    1. Forget the current zoning. What does the current and future land use map say?? One shows current zoning and areas for the city if in city limits or the county. The future land use map goes out sometimes 15 to 25 years. This shows what kind of zoning they want going where and the growth pattern. If you have AG zoning but what you want to put there with a MF doesn't fit with the land use plan your chances of getting approval are very low.

    2. Is there a similar product type in your area existing and is it trading cheaper than what you could buy the land and build it for?? If that's the case then you still have inventory for less than replacement cost. The big boom cycle happens when inventory can't keep up with demand and most of the value add has been purchased and the up cycle is occurring.

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  • Michael Spindler
    OP
    Aspiring MFR Investor - Kansas City, MO · Member since 2013 · 79 posts · 7 votes
    13y

    Joel Owens and Karen Margrave

    Thank you both. You bring up some solid points. And I don't disagree, nothing about this sounds easy, otherwise everyone would be trying it. But thank you for opening my eyes to some realities of the business.

    I will look into Development classes and other education that will gear me towards that direction... eventually. : ) In the meantime, will start small in Commercial and MFRs, starting with developing a relationship with the bank.

    Have a great day.

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