Subdivision development- don't do it, don't do it, we did it, 120% ret

Probably one of the worst REI investments you could do today is a Subdivision.  But we are doing our 2nd one. 

The picture above is from our first subdivision "Journeys End".  80 acres.  We did Country subdivision lots and sold out in 11 months.  We sale just the lots.  You can't tell from this picture, but location location.  1 mile from town, blacktop roads, 4 lane highway 200 yards away, fiberoptics.

Our second Subdivision is called "Silver Springs".  Just went on market in June.  We closed 3 lots out of 18 this year.  This is a 75 acre subdivision.  We will get 120% return on these lots.  But due to location and market these will take up to 5 years to sale most of the lots.  So the annual return will be from 120% down to about 20% per year, depending on when sold.

I would say don't do a Subdivision now, unless you fill a niche.

1.  We had the capital, so we did not need a loan.

2.  Just built lots and not homes.  Your market cycle time is a lot faster.  And you're not subject to inflation and all the headaches of building.

3.  Buy right.  This property is 75 acres which sounds large, but it is and isn't.  This came up on an auction.  Too large for most homeowners to buy.  Most farmers didn't like it because only 50 acres was farmable and the 50 acres was split into 6 entry points.  No large developer would pick this location since it is a little further from the larger markets.  It is what I call a "Nasty" property.  

4.  Although we did the easiest subdivision a person can do.  It is still Death by 1,000 cuts. You are now at the whims of bureaucracy.  You have to be able to Bull your way thru and be persistent.

What are our Unfair Advantages????

1.  Smaller lots are very rare in Farm country.

2.  We are 25 minutes away from 1mm metro area.

3.  Crime/Riots in Cities, we love them.

4.  Baby Boomers have the kids out of the house and want an acreage to have fun.

5.  People like trees, walkout basements, views, Boulders, water.  Since this property had a lot of "Waste" ground, this is actually good.  Most subdivisions are built in the middle of a flat cornfield with none of these amenities.  The farmers Waste trees are good trees.  The uneven ground is great for views and walk out basements.  The ditches have water running in them (Silver Springs name).  And we trucked in a lot of huge boulders and placed strategically.

6.  We are near a 1mm metro area.  With 18 lots, we just need 18/1,200,000 people to move here.

7.  All of our buyers on this Subdivision and our last one were fully funded thru either selling their current house or with savings.  Thus, funding has not been an issue for our buyers.

8.  Lots are 2 to 6 acres generally, which is actually large for most people who want to live in the countryside.  And also, hard to find, already prepped for you.

9.  This will sound strange, but I knew we had water.  Both the streams flowing above ground, but also, I can "Witch" for water.  There are areas in our county that have little water, or you have to drill 350 feet and might find Old or Sulphur water.  We ended up with Great water.  A good well for a modern house is 8 gallons per minute.  The wells drilled so far are 25 to over 50 gallons per minute.  Plus, there is a sand expanse of about 50-foot depth, which is all filled with water.  This is good for marketing out in the Countryside.

10.  4 schools within 8 to 15 miles.

FOMO

Once we sale 1/2 of the lots we will increase the prices.  People always have a fear of missing out.  Once you sale some lots, then people think it must be a good location.  Our first Subdivision, we sold 1/2 and then we raised the prices.  All of them sold in 11 months.

What's Next?

Actually, already have our nest "NASTY" property identified.  It's not for sale, but without going into details, I'm sure they will be glad to sale.  Even a better location than our current Subdivision.

Good deals are made.

Start small and Make Your Big Mistakes Early.

But this is too big for you?  Folks you can subdivide a 10-acre lot.  Do what fits you and work your way up.  Remember boulders, trees, views, walkout, water, location/locaton.