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Own land - want to subdivide and joint venture with builder

Charwak Gummalla
Posted Jan 10 2024, 10:58

Hello BP members,

Need some guidance here. 

We own some land in southern Charlotte which is currently zoned r-40 for single family. We want to subdivide the land and partner with a builder and build a community and share the profits. 

Looking for some pointers and how to go about it. 

W are also open to sell the lots and get out as well. 

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Henry Clark
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Henry Clark
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Replied Jan 10 2024, 11:52

Recommend you subdivide and sell the lots.  Yes your profit increases if you participate in the build, but your risk is dramatically higher and you do not control the outcome at all.  

Use the lookup function.  My name and either Journeys End subdivision or Silver Lake Subdivision. 

Do some value add.  Walk out basement sloped ground, trees, views, water features, boulders.  People like these. 

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Robert Ellis
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Robert Ellis
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Replied Jan 10 2024, 15:53
Quote from @Charwak Gummalla:

Hello BP members,

Need some guidance here. 

We own some land in southern Charlotte which is currently zoned r-40 for single family. We want to subdivide the land and partner with a builder and build a community and share the profits. 

Looking for some pointers and how to go about it. 

W are also open to sell the lots and get out as well. 


 Get an engineer who does plats. Talk to survey companies. WE typically call at least 20 and describe what we want to do and solicit proposals in columbus. each person who replies normally adds value for free and gives you advice. 

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Wyatt Wolff
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Wyatt Wolff
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Replied Jan 10 2024, 18:16

Both of the above seem like killer pieces of advice. I agree, I think lots would be much easier and quicker to move. 

Good Luck!

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Jay Hinrichs#2 All Forums Contributor
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Jay Hinrichs#2 All Forums Contributor
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Replied Jan 10 2024, 18:25

check with your CPA depending on your basis to go from a property you can 1031 to ordinary income tax it might not be worth the extra time and risk involved.

I find it pretty rare that land owners want to stay in through the whole project . Lots of moving pieces your going to have to subordinate to the builders lender.. And if the builder is not someone very very well known to you .. that takes on another huge risk.

So with the folks I buy my subdivision land from almost all have very little basis so the 1031 is the way to go.  If you go the plat route just get it all ready but DONT record it.  Let the buyer take the final step so this clearly keeps you out of dealer status 

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Dave Foster
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Dave Foster
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Replied Jan 11 2024, 16:22

@Charwak Gummalla, Adding to what @Jay Hinrichs said.  In general entitlements and rights such as density zoning etc do not create an issue with a 1031 exchange.  the commonly held demarcation is that if you turn a shovel you are changing the nature of the land.  That makes you a dealer and subject to ordinary income tax without the option of a 1031. 

When you buy you may have a tract of agricultural land.  You may annex into a city or get the planning commission to approve a density of 4 du/acre.  But what you still have is a tract of agricultural land with different entitlements if you ever choose to use them.

Once you turn a shovel then you are separating the land into lots.  It's now no longer a piece of agricultural land.  It is several individual identifiable lots.  You are a builder and have lost the option to 1031.  Good advice by Jay to compare additional tax vs profit to see if it's worth it.

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Jay Hinrichs#2 All Forums Contributor
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Jay Hinrichs#2 All Forums Contributor
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Replied Jan 11 2024, 16:46
Quote from @Dave Foster:

@Charwak Gummalla, Adding to what @Jay Hinrichs said.  In general entitlements and rights such as density zoning etc do not create an issue with a 1031 exchange.  the commonly held demarcation is that if you turn a shovel you are changing the nature of the land.  That makes you a dealer and subject to ordinary income tax without the option of a 1031. 

When you buy you may have a tract of agricultural land.  You may annex into a city or get the planning commission to approve a density of 4 du/acre.  But what you still have is a tract of agricultural land with different entitlements if you ever choose to use them.

Once you turn a shovel then you are separating the land into lots.  It's now no longer a piece of agricultural land.  It is several individual identifiable lots.  You are a builder and have lost the option to 1031.  Good advice by Jay to compare additional tax vs profit to see if it's worth it.


 I will defer to your expertise .. years ago ( 1990)s when we flipped plats in CA.. that was the advice at the time we got  do all the work simply do not record it. Which is the last step to creating each lot. I suspect the rules got clarified over the years.. However like I mentioned though long time land owners are normally making the lions share of the profit on the sale of the land and staying in simply does not improve their net cash position when you go to dealer status from 1031 tax deferral. Although the last subdivision i bought for 5.5 mil  the owner just took the cash and paid their cap gains and I know they probably did not have more than 100k into the land they owned it for about 40 years. Pretty  typical of long time Oregon land owners.

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Andy Edgemon
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Andy Edgemon
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Replied Jan 25 2024, 06:14

Do you already have a builder? Send me a DM if you are interested in teaming up what part of Charlotte. I’m in Fort Mill looking for land to build on and I have my builders license.