I’ve been asked lately what a Paper Lot vs. a Finished Lot is in new residential subdivisions. These two terms represent different points along the development path when lots trade in the marketplace.

Key Differences Between Paper and Finished Lots

• Development Stage — Paper lots: Entitled, permitted, and preliminary plat. Finished lots: Fully improved lots plus the infrastructure (roads, utilities, etc.).
• Cost — Paper lots pricing includes land costs plus seed capital to research and obtain approvals. Finished lots include paper lots, the cost of construction, and carry costs.
• Timeline to Build — Paper lots may take 12-18 months to obtain approvals. Finished lots can take 6-8 more months to deliver per phase.
• Timeline to Sell Lots – Paper Lots are sold in one transaction while Finished Lots are sold using a “takedown schedule” of 5-8 Finished Lots a month.

Paper Lots

Paper lots (sometimes called "permit-ready") is raw land which has all approvals in place to develop a residential subdivision, but lots have not yet been recorded nor constructed – including:

• Received all formal discretionary approvals (entitlements) from local government authorities e.g., zoning changes, preliminary plat approval, site plan approval, and environmental clearances. They've been surveyed, engineered, preliminarily subdivided, and construction documents.

In essence, the hard work of planning, permitting, and discretionary regulatory approval is complete, but the physical horizontal construction has not begun. Paper lots require significant seed capital at risk and time to turn into buildable lots.

Paper Lot Development Risk – Common risks include discretionary zoning denials, NIMBY, costly / impractical stipulations for approval, reduction in expected lot yield, wetland mitigation, ecological – geotechnical – environmental discoveries, etc. The developer must know how to navigate well through this environment.

Finished Lots

Finished lots (ready-to-build) are fully constructed - prepared for vertical construction (i.e., building the home itself). They include:

• Mass and lot grading, installed underground utilities (wet utilities like water/sewer/storm drains, and dry utilities like electric, gas, cable/telecom). Includes paved streets, curbs, gutters, sidewalks, streetlights, amenities, and drainage systems.

Finished Lot Development Risk – Common risks include unforeseen conditions in the soils, construction cost fluctuations, change orders, slow sales to homebuilders, high carry costs like interest, etc. The developer must have a strong CM and local GC’s to help price and scope the project.

Who Buys These Lots? National and regional home builders as well as wholesalers in some cases.

If you have an interest in residential land / lot development and want to get involved or learn more about what Avventerra Capital does, kindly direct message me. Steve Harris