Skip to content
General Real Estate Investing

User Stats

55
Posts
29
Votes
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
29
Votes |
55
Posts

Rentals to Building a Subdivision

Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
Posted Jan 12 2022, 12:34

Has anyone here gone from owning rentals to buying land and building a subdivision? I know I hear about people leveling up to multifamily, but I'm way more interested in land and land development. I was just looking to see if any others have done that and how has that journey been? Thanks in advance for your answers. 

User Stats

139
Posts
146
Votes
Don Gouge
  • Specialist
  • Johnson City, TN
146
Votes |
139
Posts
Don Gouge
  • Specialist
  • Johnson City, TN
Replied Jan 12 2022, 13:36

It's a long and capital intense process. The profits can be very good if you can get if done and sold quickly. The permit and environmental process can potentially be a nightmare. 

User Stats

55
Posts
29
Votes
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
29
Votes |
55
Posts
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
Replied Jan 12 2022, 18:29

@Don Gouge have you tried this before? What issues were found on the environmental process?

Host Financial  logo
Host Financial
|
Sponsored
15% Down DSCR Loans 80% Cash Outs Mention BPFORUM500 at Quoting to Wave $500 Processing Fee

User Stats

49
Posts
40
Votes
Doniel Winter
Pro Member
  • Asheville NC
40
Votes |
49
Posts
Doniel Winter
Pro Member
  • Asheville NC
Replied Jan 16 2022, 08:59

HI Gennaro - the journey is long, capital intensive, and not for amateurs. The process and requirements vary by region, state, county, city - and neighborhood within a city. If you search land development on BP there are hundreds of posts on the subject. Jay Hinrichs is also a good resource, he posts and has podcasted on the subject many times.

I am in year 5 and counting on the first phase of a 13 lot subdivision in Asheville NC, my first, and I would never undertake a project of this scale again. There are easier ways to make money, IMO.

That being said, the easiest way to dip your feet into development is to start with a single lot and a single house. That will give you a very good idea of what's involved on the construction end. Even better would be finding a house to rehab or flip that has enough land to do a parcel split and create a new lot - maybe even two. That would give you a taste of what's entailed in entitling land for development in your city. In my experience, there is plenty of hidden value in existing properties on larger parcels.

When it comes to development there are two common refrains that I heard from others in the beginning of my project and have found to be true: you don't know what you don't know, and you will be paying for your own education in development.

So, a great place to start are the development ordinances of the city you want to build in. It's dense and not always easy to interpret but it's all there. Also, if you see a development project in your neighborhood that interests you, find the job box on site and look at the plans, get the number of the engineer or the developer and make a call. People like to talk about their projects, you might get lucky. Last, look for a realtor that's listing land for development - it's possible they have enough experience/knowledge in the process to steer you in the right direction.

Good luck.

User Stats

55
Posts
29
Votes
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
29
Votes |
55
Posts
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
Replied Jan 16 2022, 09:55

@Doniel Winter Thank you, that was exactly what I was looking for. I currently am doing exactly what you were talking about, subdividing a lot (remodeled the original house) and looking to build a duplex on the new lot. So far so good, and the people from the town have been super helpful and are great resources for info. I see from your response some of the issues I was expecting to be the biggest barriers to entry: capital and regulations/time to get approvals. Thanks I’ll continue to do my homework throughout the process! Cheers!

User Stats

49
Posts
40
Votes
Doniel Winter
Pro Member
  • Asheville NC
40
Votes |
49
Posts
Doniel Winter
Pro Member
  • Asheville NC
Replied Jan 16 2022, 11:39

That's awesome man! Like said, in the last 5 years, had I stuck to doing what you're doing (which I have done a few times as well) I could probably have accumulated the same number of building lots in prime Asheville neighborhoods, with more certainty, less effort, less risk, and with no more capital than we have invested now (about 600k). Buy, split, flip, build, repeat is a great formula. And don't forget about adding ADU's. ROI per sqft built is probably 1.5x single family in prime Asheville neighborhoods. So everything we build to rent going forward will have an ADU that's rented separately.

Ultimately, a rising market and that we had money to self finance is what saved our project. Had we started this with a hard money lender or something we'd have been toast after year two...

User Stats

55
Posts
29
Votes
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
29
Votes |
55
Posts
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
Replied Jan 16 2022, 12:03

@Doniel Winter that's some good advice. Since this last one, every house I look at, I'm also thinking, "how can I add value"? ADU, lot split, turn 2/1 into 3/2. I'm glad to hear from someone else doing it. Gives me additional confidence that what I'm doing is repeatable and I didn't just get lucky the 1st time. Thanks

User Stats

55
Posts
29
Votes
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
29
Votes |
55
Posts
Gennaro Coscia
  • Rental Property Investor
  • Apex, NC
Replied Jan 16 2022, 12:05

I’m also self financing (with a partner) so the risk of hard money lending issues isn’t a factor.

User Stats

39,727
Posts
58,396
Votes
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
58,396
Votes |
39,727
Posts
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied Jan 16 2022, 12:19
split off one lot is pretty straight forward in most jurisdictions.  its when you create a TRUE subdivision that the game changes dramatically and its all about the local jurisdictions what can take 12 months or less in one city/county could be 5 to 20 years in others especially California.   In Oregon the second project I did 104 lots I went from putting it into contract and having an approved plat in about 120 days.. But then the city hired a new engineering firm and they started to condition the heck out of  us and cost us 2 years and we had to bring a 12 inch water line 1000 feet across town which entailed buying two easements to the tune of 250k..  ETC ETC ETC.  WE paid cash for the dirt and still made a nice profit but like you said HML is simply a non starter for subdividing.  Lots splits that are basically administrative you can take on debt.

my current 90 home project  600k to 800k finished product we bought from when it was 2 years through the process but still took 2 more years before we could break ground.. Its been very successful as most real estate has been last 7 years or so.  But one thing I have learned coming out of the GFC  I want the dirt paid for in one way or the other NO debt on the dirt so if you do need to HOLD through a cycle you can without a ton of stress. 

User Stats

2,256
Posts
877
Votes
Hai Loc
  • Specialist
  • Toronto, Ontario
877
Votes |
2,256
Posts
Hai Loc
  • Specialist
  • Toronto, Ontario
Replied Jan 17 2022, 06:07

@Gennaro Coscia

In my neck of the woods there is huge money in residential development land to build single homes, towns etc...

But at the same time it's 7-8 figure investment with low supply and opportunity with high demand...

In terms of building for rentals it doesn't make sense where I am.. too many fees and cost of construction is high that doesn't make sense

User Stats

39,727
Posts
58,396
Votes
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
58,396
Votes |
39,727
Posts
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied Jan 18 2022, 07:36
Originally posted by @Hai Loc:

@Gennaro Coscia

In my neck of the woods there is huge money in residential development land to build single homes, towns etc...

But at the same time it's 7-8 figure investment with low supply and opportunity with high demand...

In terms of building for rentals it doesn't make sense where I am.. too many fees and cost of construction is high that doesn't make sense

its the same in many markets in the US  simply put  existing rental properties cost less than replacement by a long shot.. so in these areas new construction is basically nill  or only done by non profits.

User Stats

430
Posts
263
Votes
Carini Rochester
  • Investor
  • Rochester, NY
263
Votes |
430
Posts
Carini Rochester
  • Investor
  • Rochester, NY
Replied Jan 18 2022, 07:55

@Jay Hinrichs wrote: "new construction is basically nill or only done by non profits."

TRANSCENDENT ELECTRA TO ADD NEARLY 3,500 BUILD-TO-RENT HOMES TO PORTFOLIO

by Christine Serlin

Transcendent Electra, a joint venture between single-family rental platform Transcendent Investment Management and longtime multifamily owner/operator Electra America, will add nearly 3,500 new single-family homes and townhomes to its portfolio through a more than $1.25 billion transaction.

The joint venture is acquiring the homes from an undisclosed corporate seller. The first phase includes new-construction communities with 1,424 single-family homes and townhomes in Atlanta and Athens, Georgia; Tampa, Florida; and Pinehurst, North Carolina. These transactions top $504 million.

More than 2,000 additional units totaling $750 million will follow in Florida, Georgia, South Carolina, and Texas. The entire portfolio is expected to be delivered by the end of this year, according to the joint venture.

https://www.builderonline.com/building/transcendent-electra-to-add-nearly-3-500-build-to-rent-homes-to-portfolio_s?utm_source=newsletter&utm_content=Article&utm_medium=email&utm_campaign=BP_011722&

User Stats

39,727
Posts
58,396
Votes
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
58,396
Votes |
39,727
Posts
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied Jan 18 2022, 07:57
Originally posted by @Carini Rochester:

@Jay Hinrichs wrote: "new construction is basically nill or only done by non profits."

TRANSCENDENT ELECTRA TO ADD NEARLY 3,500 BUILD-TO-RENT HOMES TO PORTFOLIO

by Christine Serlin

Transcendent Electra, a joint venture between single-family rental platform Transcendent Investment Management and longtime multifamily owner/operator Electra America, will add nearly 3,500 new single-family homes and townhomes to its portfolio through a more than $1.25 billion transaction.

The joint venture is acquiring the homes from an undisclosed corporate seller. The first phase includes new-construction communities with 1,424 single-family homes and townhomes in Atlanta and Athens, Georgia; Tampa, Florida; and Pinehurst, North Carolina. These transactions top $504 million.

More than 2,000 additional units totaling $750 million will follow in Florida, Georgia, South Carolina, and Texas. The entire portfolio is expected to be delivered by the end of this year, according to the joint venture.

https://www.builderonline.com/building/transcendent-electra-to-add-nearly-3-500-build-to-rent-homes-to-portfolio_s?utm_source=newsletter&utm_content=Article&utm_medium=email&utm_campaign=BP_011722&

 MY point is in many mid western cities NOT the ones you mention new construction for rental purposes is very small  simply eaiser to buy existing homes for less money and same rents.  I get the build to rent in those markets I am personally building for rent in FLA myslf and funded a 80 home build for rent in Altanta last year.

IRA Club  logo
IRA Club
|
Sponsored
An IRA Administrator Flat fees. No percentages. Grow your retirement fund: Invest in real estate with a self-directed IRA

User Stats

430
Posts
263
Votes
Carini Rochester
  • Investor
  • Rochester, NY
263
Votes |
430
Posts
Carini Rochester
  • Investor
  • Rochester, NY
Replied Jan 18 2022, 08:31

@Jay Hinrichs I hold your name and reputation in very high regard! I was extremely hesitant to post anything that might look like I was contradicting you. Thanks for the informative response. I like to keep an eye on what the big boys are doing and found that article to be quite interesting.

All the best.

User Stats

39,727
Posts
58,396
Votes
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
58,396
Votes |
39,727
Posts
Jay Hinrichs#1 All Forums Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied Jan 18 2022, 08:47
Originally posted by @Carini Rochester:

@Jay Hinrichs I hold your name and reputation in very high regard! I was extremely hesitant to post anything that might look like I was contradicting you. Thanks for the informative response. I like to keep an eye on what the big boys are doing and found that article to be quite interesting.

All the best.

AS well I should have been more specific.. that in MANY Markets were the price of existing rentals is still far below replacement cost to build there is very little new construction for rental purposes.  Its mainly done in the markets suggested where dirt and construction costs are far below one off or other areas of the country and the numbers still provide some positive return  .  For instance South side of Chicago is a huge area your not going to build new construction the cost to build those awesome brick two flats would be close double to what you can buy them for now and the land is free.. So the little bit of new construction you see there is NON profits.  that's one city example  And I know a tad about Canada and pricing and the same issue is in that state so I was responding to the CA  poster..  prices have sky rocketed in Canada I mean like a roman candle in the last 20 years.

User Stats

139
Posts
146
Votes
Don Gouge
  • Specialist
  • Johnson City, TN
146
Votes |
139
Posts
Don Gouge
  • Specialist
  • Johnson City, TN
Replied Jan 18 2022, 09:04

The biggest assets of large (1000+ yearly) homebuilders is their ready to build lots. The secret isnt really the houses they are building but the lots they have to build on. Some firms just develop the lots and then sell the entire subdivision to the big builder. As has been alluded to before, I would partner or at least get extensive advice from experiend developers or engineering firms that have designed subdivisions. I did a small subdivision many years ago and built a few houses in it and also sold some lots. My real land profit was tied up in unsold lots that I eventually sold off over the years. When I first started building spec houses in the early 90s, I was able to buy some nice lots in good subdivisions that were built in the mid 70s before the economy imploded. Developers either went bankrupt or just couldn't sell because the economy tanked. They got caught holding the bag. I have tried to remember that you are depending on the condition of the economy a few years away when you start.

User Stats

123
Posts
328
Votes
Trevor Fleck
  • Investor
  • Fort Collins, CO
328
Votes |
123
Posts
Trevor Fleck
  • Investor
  • Fort Collins, CO
Replied Jan 18 2022, 19:56

@Gennaro Coscia I'm in Apex myself! We'll have to connect and get coffee sometime. I can't speak to subdivisions, but as a start I am doing new construction build to rent in Cape Coral, FL. Purchasing lots and building on them. Might be a way to dip your toe in the water.