How do you start a subdivision?

[Patrick Philip]

Suppose you want to buy a few hundred acres, and then split them up into individual parcels and build a house on each one. How do you know that the local Zoning Department will allow you to change the zoning? (which I assume would be agricultural at the time you buy it). 

[Geordy Rostad]

@Patrick Philip

Changing zoning is a big deal. Especially when you are trying to go from agricultural zoning to something like 4-8 houses per acre. That will involve major planning meetings and public hearings. Trying to approach something like this is most likely a complete waste of time and effort... unless you have carefully studied the city/county grow plan and you determine that this zoning change is one of the next logic steps within the course of that plan. If you can suggest something that makes complete sense like this, then you might have a shot at it.

One thing to keep in mind though is that often agricultural land can have major wetland issues or be in a floodplain, etc. If this is the case, the change is even more unlikely to ever be approved.

[Jay Hinrichs]

yup nearly impossible for the small investor.. this is big deep pockets corporate type transactions.

[Patrick Philip]

Originally posted by @Geordy Rostad:

@Patrick Philip

Changing zoning is a big deal. Especially when you are trying to go from agricultural zoning to something like 4-8 houses per acre. That will involve major planning meetings and public hearings. Trying to approach something like this is most likely a complete waste of time and effort... unless you have carefully studied the city/county grow plan and you determine that this zoning change is one of the next logic steps within the course of that plan. If you can suggest something that makes complete sense like this, then you might have a shot at it.

One thing to keep in mind though is that often agricultural land can have major wetland issues or be in a floodplain, etc. If this is the case, the change is even more unlikely to ever be approved.

 I see developers build neighborhoods all the time. I also see listings on LoopNet of large parcels that say "would be perfect for a new neighborhood" or "plans approved for 100 single-family homes" Maybe these parcels are already zoned residential.

[Geordy Rostad]

@Patrick Philip

Yes, that is correct. In those cases, the zoning most likely already supports the new use they are proposing. 

If you find a deal like that and you want to do your due diligence, you need to just go down to the city or county and meet with the planning department to discuss the usage and potential issues you might face. The city/county should be able to look up nearby recent subdivisions and tell you what kinds of things were required for those projects.

A subdivision project can have a lot of unknowns up front. The costs of doing all the civil engineering and bringing in utilities to fully develop the land and make it ready to build often surprises people. The planning department is the place to start though.

[Jay M.]

If your pockets aren't deep enough to lose a six figure sum just to determine that it isn't a deal then you're barking up the wrong tree on this one.  The cost in engineering fees, permitting, commissions, attorney fees, market analysis and development, utility engineering, water / septic concerns (possibly even having to build a sewage treatment plant), architectural fees.......etc... just to get to the point to determine if it's feasible is absolutely staggering.  And time consuming.  The builder I complete most of my designs for has a 384 lot subdivision they've been working on for 4 years.   They're still a year or more away from a shovel.......If they're lucky!

[Patrick Philip]

Originally posted by @Jay M.:

If your pockets aren't deep enough to lose a six figure sum just to determine that it isn't a deal then you're barking up the wrong tree on this one.  The cost in engineering fees, permitting, commissions, attorney fees, market analysis and development, utility engineering, water / septic concerns (possibly even having to build a sewage treatment plant), architectural fees.......etc... just to get to the point to determine if it's feasible is absolutely staggering.  And time consuming.  The builder I complete most of my designs for has a 384 lot subdivision they've been working on for 4 years.   They're still a year or more away from a shovel.......If they're lucky!

 What has been their main delay on the 384 lot subdivision? Is it lack of money? Or something else?

[Patrick Philip]

Originally posted by @Geordy Rostad:

@Patrick Philip

Yes, that is correct. In those cases, the zoning most likely already supports the new use they are proposing. 

If you find a deal like that and you want to do your due diligence, you need to just go down to the city or county and meet with the planning department to discuss the usage and potential issues you might face. The city/county should be able to look up nearby recent subdivisions and tell you what kinds of things were required for those projects.

A subdivision project can have a lot of unknowns up front. The costs of doing all the civil engineering and bringing in utilities to fully develop the land and make it ready to build often surprises people. The planning department is the place to start though.

 Okay. So for now, I'll limit myself to parcels that have already had their zoning changed to residential. 

What are the added steps involved? I'll take a guess...

I would need roads built. I would need drainage ditches on the side of them. I would need power lines. I would need street signs and stop signs, etc.

I would not need city water or sewer. There's nothing wrong with well and septic houses. 

[Geordy Rostad]

@Patrick Philip

There is much more paper work for a subdivision than there is bulldozer work.

You will need a civil engineer to draw up all of the lots and plot out your plat. You'll probably need environmental studies. Possibly traffic impact studies. Maybe some other studies I've never heard of.

Then the city will probably make you pay for them to hire professionals to review your studies (at least they do here).

I'm drastically oversimplifying the amount of paperwork but after you get through all of that, THEN you can do the actual work of trenching in your utilities. Building your detention ponds for drainage, mitigating and protecting any environmentally sensitive areas, and then roads, ditches, etc.

The paperwork you do will specify exactly what work will need to be done and how it will need to happen. Doing all the paperwork, city meetings, studies, etc, that's where the time gets taken. On the 384 @Jay M. is talking about, it's not a lack of money. If they didn't have the money to sink on that, they never would have been able to get into it in the first place.

Some of the city requirements have specific periods of time attached to them such as public notice and hearings. The city HAS to take a certain amount of time to complete those tasks based on laws and regulations. 

Choosing to use wells and septic over city water will not be a choice you get to make. That will be entirely up to the city. Typically if sewer is anywhere near your site, you will be forced to use it. Even if it's not near your site, you might still be forced to use it and you will have to spend the $1000's per foot to bring a new main to your plat. 

[Jay M.]

 What has been their main delay on the 384 lot subdivision? Is it lack of money? Or something else?

 It's everything.  Town planning department, town meetings, engineering after town approval to determine what type of zoning.  Now they're hung up on water supply after finally getting approval for the home sites.  It's not guaranteed they will have the water to do this so 4 years later there is still a chance it's not buildable.  The days of the 1950's where you bought large tracts of land in AZ or FL and subdivided it and start marketing it in 6 months are over........Way over!!  The regulation required to build a single family home on a lot that has already been approved for single family use is absolutely staggering.

[Jay Hinrichs]

Originally posted by @Jay M.:

 What has been their main delay on the 384 lot subdivision? Is it lack of money? Or something else?

 It's everything.  Town planning department, town meetings, engineering after town approval to determine what type of zoning.  Now they're hung up on water supply after finally getting approval for the home sites.  It's not guaranteed they will have the water to do this so 4 years later there is still a chance it's not buildable.  The days of the 1950's where you bought large tracts of land in AZ or FL and subdivided it and start marketing it in 6 months are over........Way over!!  The regulation required to build a single family home on a lot that has already been approved for single family use is absolutely staggering.

Jay M  not only  great name  but exactly right..  I have a few communities in Oregon going now.. and built 2 communities last 3 years these are fair sized for our area as there are generally no parcels in the urban growth boundary that will allow more than 100 detached homes.. 

First one is 90 lots  we had to get this annexed into the city.. took a year master plan it with neighbor took two years.. Then close on it for all cash 7.2 million.. we are now going to break ground on the first phase of 30 lots in Aug.. Just got my loan approvals at 1.7 mil for that work plus the cost of the dirt.. 300k in soft cost and 3 years in the making.. the nice thing about our market in Oregon NO one buys before approvals you risk entitlement costs.. but close on dirt is after that..  and even the huge players do it the same way..  Unless your buying dirt that is FAR under market.

Second one is to your point.

Its 160 lots  I optioned 2 years ago for 100k plus I have put 50k into civil.. my contract reads I close when I can get pre lim plat approval.

well in the meantime water moratorium and a new transportation plan.. when we started city was Ok with our ingress from the hwy now they want it controlled with maybe  traffic circle ( 5 million) I am paying 4.4  for the dirt.. so you can see how that no work.. City is working on funding to pay for that.. and working on water so probably another 2 to 3 years..  

its one reason as well why DR and Lennar and Lyon homes these days want only shovel ready lots and will pay top of market.  

and it takes just as long to do a 5 lot division as a 30..  Land development for building is capital intensive and fraught with uncertainty we know going into any of these deals we are going to risk 100 to 200k by risk I mean totally lose it.. 

[Doniel Winter]

Start by going to your county's GIS and get all the information you can about the parcel. Then research your city/county development ordinances online. Next, take your hypothetical parcel and visit your planning departments and just ask questions, you might find a person that's helpful (this may take a few visits).

Still interested? Find a civil engineer and see if one will give you the time to bend their ear and tell you what's possible. They can also ballpark costs. There's usually a job box on a build site, and in that box a set of plans by an engineer. If the development is similar to what you're interested in doing, approach the engineer on the plans.

I would also sit in on meetings - at your City Council, Planning Department, Board of Adjustments, etc. - related to subdivision projects. I've learned quite a bit just by listening to other developers push their projects through the approval process.

Like Jays said above, this is a deep pockets proposition and takes time, even on a small project. The one I'm doing - my first - has taken 2 years and two civil engineers to get through the approval process, and it's only 7 building lots. Had I not been able to self-finance the project to this point I would have been toast, carry costs on the land would have killed me before I even moved any dirt. 

Here are the estimated costs on my first project: $50k in civil engineering/permitting/etc, $300k in site work (silt fencing, lot clearing, grading, retaining walls, storm water, driveways/aprons, a city spec road, a turn-round for the fire department, sewer taps, a 325' water main & hydrant..... and more.) Land cost not included.

I should have 7 lots ready to "drop a box" early next year @ a per lot cost under par for projects in the area, a number I got by asking other builders (and real estate agents) with projects near mine. That's another resource, other local builders and developers, smaller ones in my case. Most have been really helpful, and if you ask a half dozen you start to develop a consensus on best practices.

My most important lesson so far: a referral to a good civil is invaluable. Then get a referral from your civil for your surveyor. Had I started with a better civil I believe my project would have been approved much earlier.

Developing is time and intensive. Risk is high. Be prepared to be hands on 24/7/365. I am paying for an education in development, something a developer friend said would happen @ the start of my project. "You don't know what you don't know", and had I to do it over again I would have talked to as many other developers, engineers, planners, contractors, utility contractors, graders etc. as I could before I spent my first dollar on a site plan. There's a ton of knowledge out there, and most people are happy to help someone who is just starting out. In the beginning, the more curious you are the higher your chances of success. IMO.

[Patrick Philip]

Originally posted by @Doniel Winter:

Start by going to your county's GIS and get all the information you can about the parcel. Then research your city/county development ordinances online. Next, take your hypothetical parcel and visit your planning departments and just ask questions, you might find a person that's helpful (this may take a few visits).

Still interested? Find a civil engineer and see if one will give you the time to bend their ear and tell you what's possible. They can also ballpark costs. There's usually a job box on a build site, and in that box a set of plans by an engineer. If the development is similar to what you're interested in doing, approach the engineer on the plans.

I would also sit in on meetings - at your City Council, Planning Department, Board of Adjustments, etc. - related to subdivision projects. I've learned quite a bit just by listening to other developers push their projects through the approval process.

Like Jays said above, this is a deep pockets proposition and takes time, even on a small project. The one I'm doing - my first - has taken 2 years and two civil engineers to get through the approval process, and it's only 7 building lots. Had I not been able to self-finance the project to this point I would have been toast, carry costs on the land would have killed me before I even moved any dirt. 

Here are the estimated costs on my first project: $50k in civil engineering/permitting/etc, $300k in site work (silt fencing, lot clearing, grading, retaining walls, storm water, driveways/aprons, a city spec road, a turn-round for the fire department, sewer taps, a 325' water main & hydrant..... and more.) Land cost not included.

I should have 7 lots ready to "drop a box" early next year @ a per lot cost under par for projects in the area, a number I got by asking other builders (and real estate agents) with projects near mine. That's another resource, other local builders and developers, smaller ones in my case. Most have been really helpful, and if you ask a half dozen you start to develop a consensus on best practices.

My most important lesson so far: a referral to a good civil is invaluable. Then get a referral from your civil for your surveyor. Had I started with a better civil I believe my project would have been approved much earlier.

Developing is time and intensive. Risk is high. Be prepared to be hands on 24/7/365. I am paying for an education in development, something a developer friend said would happen @ the start of my project. "You don't know what you don't know", and had I to do it over again I would have talked to as many other developers, engineers, planners, contractors, utility contractors, graders etc. as I could before I spent my first dollar on a site plan. There's a ton of knowledge out there, and most people are happy to help someone who is just starting out. In the beginning, the more curious you are the higher your chances of success. IMO.

 What exactly is the role of the civil engineer?

[Doniel Winter]

You hire a civil engineer to design your subdivision vis a vis code/ordinances and help you get it approved by your city/county planning departments to build dwellings. Many cities have a comprehensive plan to guide their growth and development goals, and have adopted development ordinances that support that plan. Here's one:

https://library.municode.com/nc/asheville/codes/code_of_ordinances

It's all the rules that govern development, and your civil engineer should know all that's pertinent to your type of project. 

I've discovered good ones know most of what they should. Bad ones are shockingly ignorant.

[Patrick Philip]

Originally posted by @Doniel Winter:

You hire a civil engineer to design your subdivision vis a vis code/ordinances and help you get it approved by your city/county planning departments to build dwellings. Many cities have a comprehensive plan to guide their growth and development goals, and have adopted development ordinances that support that plan. Here's one:

https://library.municode.com/nc/asheville/codes/code_of_ordinances

It's all the rules that govern development, and your civil engineer should know all that's pertinent to your type of project. 

I've discovered good ones know most of what they should. Bad ones are shockingly ignorant.

 What if I can look these rules up myself? And what if the listing already has a map of how the parcels can be split? (As some of them on LoopNet do).

[Jay Hinrichs]

Originally posted by @Doniel Winter:

You hire a civil engineer to design your subdivision vis a vis code/ordinances and help you get it approved by your city/county planning departments to build dwellings. Many cities have a comprehensive plan to guide their growth and development goals, and have adopted development ordinances that support that plan. Here's one:

https://library.municode.com/nc/asheville/codes/code_of_ordinances

It's all the rules that govern development, and your civil engineer should know all that's pertinent to your type of project. 

I've discovered good ones know most of what they should. Bad ones are shockingly ignorant.

in some markets throw in a 250 to 500k EIR  on top of all that.. we were paying 100 to 200k for EIRS back in the 80s in CA..  

[Doniel Winter]

Patrick, a map of what's possible and what's approved are very different propositions. If it says approved plans the person/broker selling can give you some information. Try and get a copy, head to your planning department, start due diligence. There are usually several senior level planners in a department, and my experience is you get assigned one for your project that liaisons you through the process.

[Andy Hains]

It's nice to get a lot of advice on what pitfalls to look out for, and what costs to expect. At the end of the day, it can be done in certain situations and places with enough determination. Each state is different and each county and city is different. You might be looking at a piece of land that requires 10 years and 10 million to develop, or it could be easier than that. If you've never done it, you will need to partner with someone who has deeper pockets and experience, but it's possible if this is something you really want to do.