A common way small land deals fall apart: zoning vs. entitlement reality
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Developer · Palm City, FL · Member since 2018 · 326 posts · 99 votes
9moI agree with you both. Great conversation starter, Greg. @Greg Saia @Stuart Udis
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- 9moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Greg Saia Zoning and entitlement risk are always municipality specific and sometimes even neighborhood specific. One common mistake I see and a lesson that applies almost everywhere comes up with by right multifamily projects. Investors often value the land based on the maximum number of units allowed by zoning and assume they need to build every unit they are entitled to. Then the units don't layout well in the building given the site constraints and proceed to build a lousy building with poor layouts.
Completely agree. That’s a great example of how “by-right” on paper doesn’t translate cleanly into a buildable or financeable outcome.
I see the layout issue you’re describing come up a lot on constrained infill sites—especially when max unit counts drive land value before basic test fits or parking realities are fully thought through. By the time that mismatch shows up, the capital stack and expectations are already anchored to a number that’s hard to walk back.
It’s another reason why early feasibility needs to look past what zoning technically allows and focus on what actually works given site constraints, approvals, and end-user demand.
- Developer · Palm City, FL · Member since 2018 · 326 posts · 99 votes9mo
I agree with you both. Great conversation starter, Greg. @Greg Saia @Stuart Udis
- Title Representative · Irvine, CA · Member since 2017 · 874 posts · 519 votes9mo
@Greg Saia good point(s)! I'm a land broker in Southern California. For smaller-to-medium size deals, the more savvy buyers will have a conceptual site plan done by an architect/engineer and will have what we call out here a "pre app" meeting with Planning at the city, to see if there are any initial comments and feedback from Planning (or other city departments) if there are any constraints they see from the out-set that could put downward pressure on the ultimate unit count yield. Also, vetting it by the fire department can be good, since they may have certain requirements, i.e. a hammer-head turn-around, etc. Yes, sometimes developers can lose units if the city requirements more guest parking, more space for trash enclosures, more open space/amenities, a detention basin, etc. For larger transaction, the large homebuilders pretty much always would require that they are not willing to close until the Tentative Tract Map approval, so that they will know for sure what their ultimate lot count will be, however they will pay a decent premium for entitled land versus unentitled. Also, they'll do multiple non-refundable deposits along the way.
@Bryant Brislin Well said. The pre-app and early agency feedback you’re describing are often where the theoretical yield starts to get grounded in reality.
What I’ve found is that the value of that early work isn’t just confirming unit count, it’s also helping developers/builders understand where the risk actually sits and how to price or structure around it. Once things like fire access, parking ratios, or open space requirements start influencing yield, the conversation quickly shifts from “what’s allowed” to “what’s financeable and marketable.”
That same dynamic shows up in deal structure, as you noted with larger builders tying closings to entitlement milestones and paying premiums only once uncertainty is reduced. Different scale, same principle: entitlement clarity drives value, and uncertainty needs to be accounted for early; either in price, timing, or exit expectations.
- 8moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Greg Saia:
@Bryant Brislin Well said. The pre-app and early agency feedback you’re describing are often where the theoretical yield starts to get grounded in reality.
What I’ve found is that the value of that early work isn’t just confirming unit count, it’s also helping developers/builders understand where the risk actually sits and how to price or structure around it. Once things like fire access, parking ratios, or open space requirements start influencing yield, the conversation quickly shifts from “what’s allowed” to “what’s financeable and marketable.”
That same dynamic shows up in deal structure, as you noted with larger builders tying closings to entitlement milestones and paying premiums only once uncertainty is reduced. Different scale, same principle: entitlement clarity drives value, and uncertainty needs to be accounted for early; either in price, timing, or exit expectations.
These items are so site and jurisdiction specific. As stated big boys want full approvals before closing but will risk EM Small developers risk EM because they dont know what they dont know as it relates to the process and what the city or county can come up with during the process not to mention neighbors.
Oregon is pretty wild in this stuff they go the other way the state wants MAX density. So if your zoned for say 3k sq ft lots and the site calls can layout 20 you have to plat 20 you cant go less which is counter intuitive to the deals we did in CA were planning and local politics generally speaking is trying to limit density.. Although I guess with all the new bills being passed about tiny homes or secondary homes on single lots thats being allowed now .. I have not done any of those personally. The other gotcha in PDX proper when it relates to density there are zoning codes that do not allow parking. I had a project of 3 homes on a 50X 120 lot that ran street to street on the back street I could do off street parking next to the house but no garage I wanted to go underneath the duplex on teh other street and that was not allow parking had to be ON the street.. you know planners everyone will want to ride their bike or take a bus to work. Street parking was a mess then add in a few homeless idiots and it was a challenge that one. Had I not got a killer deal on the lot it would have been a poor project but in the end we did OK. We got the lot through a Trustee sale so never really had time to do up front entitlement work.
- New to Real Estate · NJ · Member since 2025 · 38 posts · 8 votes8mo
This resonates a lot. I think “zoned correctly” gives people a false sense of certainty, especially on smaller sites where discretion and interpretation matter more than what’s written on paper. The gap between theoretical density and what staff or council will actually support is where timelines and returns quietly get rewritten.
I also like your point about contract sequencing once money goes hard before entitlement risk is truly understood, leverage shifts fast and optionality disappears. Pressure-testing early feels less about killing deals and more about pricing risk correctly or structuring exits that still work if approvals come back tighter than expected.
When you’re evaluating early entitlement risk, what signals do you weigh most heavily staff feedback, precedent projects nearby, or political sentiment at the council level?
@Dillon ClarkI don’t think any one signal carries the most weight in isolation — it’s more about whether they align or start to diverge.
Staff feedback is usually the first reality check, especially on interpretation and process, but I’m careful not to over-anchor on a single conversation. Precedent helps, but only if it’s recent and truly comparable — older approvals or larger sites can create false comfort. Political sentiment tends to matter most when something pushes outside established norms or timing is tight.
What raises flags for me early is when one of those inputs looks “clean” on paper, but the others feel fuzzy or conditional. That’s often where timelines stretch, scope gets compressed, or leverage shifts once money goes hard.
Early on, I’m less focused on predicting the outcome and more focused on understanding where discretion actually lives and whether the deal structure can tolerate it if things come back tighter than hoped.
@Jay Hinrichs That’s a great example of how policy intent and on-the-ground reality don’t always line up cleanly — especially on smaller sites.
What your story highlights for me is that jurisdiction-specific rules aren’t the real risk by themselves. The risk shows up when outcomes are forced (max density, parking mandates, interpretation shifts) and the deal doesn’t have enough basis or structure to absorb them.
When the basis is strong, you can survive quirks, reversals, or inefficiencies. When it’s not, the same “by right” rules can quietly turn a deal marginal. That’s why early clarity — or at least honest acknowledgment of where discretion lives — matters so much before money goes hard.
Not every deal needs full entitlement certainty, but every deal needs a structure that can tolerate how unpredictable that path can be.
This hits hard. One thing I learned the expensive way: call the city planner before you even make an offer, not after. Most investors skip this 15-minute call that could save months of headaches. I ask specifically "what would you red flag about this address?" - they usually know the neighborhood politics better than anyone. Are you calling planners early or waiting until you're under contract?
- New to Real Estate · NJ · Member since 2025 · 38 posts · 8 votes8mo
@Greg Saia
That’s a really helpful way to frame it not trying to predict the outcome, but mapping where discretion actually sits and whether the deal structure can absorb it. I’ve been noticing the same thing: the risk isn’t usually in the written code, it’s in the gaps between staff interpretation, political appetite, and how comparable the precedent really is.
One thing I’ve been trying to get better at early is distinguishing between “clean on paper but conditional in practice” versus situations where the discretion is real but predictable. When you see those inputs start to diverge, how do you decide whether it’s a pricing adjustment, a sequencing adjustment, or a signal to walk entirely? Agreed — early planner conversations can be incredibly valuable, especially on smaller sites where interpretation and neighborhood context matter as much as code.
I try to use those calls less as a “will this get approved?” check and more as a way to understand where discretion lives — interpretation issues, political sensitivity, staff workload, or anything that tends to slow or reshape similar projects. The answers are often indirect, but they’re still very informative.
What matters just as much as making the call is how the deal is structured afterward. Early feedback is most useful when there’s still flexibility in timing, scope, or exit — not after money is already hard and options are limited.
That’s a great distinction — and for me the decision usually turns on whether the uncertainty is reducible and who controls it.
If discretion exists but can be narrowed through time, information, or targeted spend, that’s often a sequencing question. If it’s largely outside your control but bounded, that tends to show up as a pricing issue.
Where I get uncomfortable is when discretion is both material and open-ended, especially if reducing it requires capital to go hard or decisions to be made before the answers come back. That’s usually the signal to slow down or walk.
I’m less worried about taking risk than I am about taking risk that can’t be re-shaped once you’re committed.
- New to Real Estate · NJ · Member since 2025 · 38 posts · 8 votes8mo
@Greg Saia
Totally agree, the risk that worries me isn’t the stuff you can quantify, it’s the discretionary space that widens once you’re committed and can’t reshape the deal anymore. The way you’re framing it is reducible vs. open‑ended uncertainty, and who actually controls the levers is exactly where I’ve been trying to get more disciplined.
What you said about discretion expanding as more eyes get on the deal really resonates. I’ve seen situations where everything looked clean early, but once staff, legal, or a neighborhood group weighed in, the “path” shifted and suddenly the only way forward required decisions that locked you in before the real answers came back. That’s the scenario I’m trying to avoid.
I’m finding that the hardest calls are the ones where the deal pencils if the signals eventually converge, but you’re still in that fuzzy middle zone. That’s where your point about understanding where discretion actually lives becomes the whole ballgame.
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