Subdivision Tips

It’s below the ground that counts:

It’s easy to make the mistake of thinking that land subdivisions are easy, at the end of the day it’s just one block of vacant land cut into more smaller blocks of land, right? Wrong!

I’m sure everyone has heard at least one subdivision disaster story, where someone has bought a block of land planning to subdivide it only to find out after going unconditional on the purchase that it can’t be done or it’s going to be a lot more expensive than expected. It’s crucial to know what to look for and what due diligence needs to be done before committing to a site. It needs to be serviceable (water, sewer, power, telecoms etc.), it also must have a legal point of discharge among other things.

Learn back of the envelope numbers:

What are back of the envelope numbers? Simple numbers to allow you to do a quick feasibility “on the back of an envelope” to decide whether a site is worth looking at more or not. Each area is different but $150k for the first new lot and $100k for every lot after tends to work as rough numbers for most small projects (in and out). These numbers assume the project is very straight forward and won’t cover any additional costs beyond the minimum.

Allow sufficient time:

One thing that doesn’t work well in subdivisions is optimism. We encourage it as a way of life, but in developments you’ll be better served hoping for the best but preparing for the worst. The one thing you can count on with subdivisions is that there will always be issues to overcome. There will always be curve balls and challenges, which typically result in time delays and cost increases. For small subdivisions 12 months is a standard time to get in and out for a relatively straight forward project in a fluid market, which is why you should budget for 18 months.

Keep it simple:

Don’t let your ego run the show, keep it simple. Trying to force projects is a recipe for disaster. Stick to simple straight forward projects. Get in, get out, get paid! Taking on complicated projects just creates a bottle neck and can hurt your long term motivation and therefore results.

Make sure there’s enough margin!

It’s not about who makes the most money, but who gets to keep the most. Doing fine margin projects will eventually bite you in the backside and can send you back to ground zero. You are better off doing less subdivision projects and keeping healthy margins, than trying to push through more on fine margins. Not only will it cause tremendous stress, but it will end badly. Anyone that has done even a few subdivisions will tell you that unforeseen costs are just a regular part of business, which is why we must work with conservative numbers.