What you need to know before you invest in subdividable land.
In real estate terms, subdividing is where a larger parcel of land is divided, and a separate legal title is established for each of the new smaller sections.
Successfully subdividing land into residential real estate lots can have many benefits, including providing the landowner with increased profits and flexibility.
If you are buying or selling a large parcel of land, consider whether or not subdividing the land can help you maximize your real estate resources. Here are a few considerations for landowners, or those seeking to buy land, who are thinking about subdividing:
- The parts could be more valuable than the whole, meaning that you can often increase the profitability of the land by subdividing it into lots then selling it to two or more buyers.
- If you are a landowner/homeowner that does not use all of your property, subdividing the land may give you the option to cash in on what’s currently just sitting there idle. Holding onto some of your land and selling off part of your property can give your property time to increase in value as the surrounding subdivided land gets developed.
- One large parcel of land could be more difficult to sell than multiple smaller lots at a lower price point, relatively speaking. In short, it is important to understand your local market’s needs. With the boom of small businesses and homeowner’s association-regulated neighborhoods in Frederick, take into consideration how this will impact subdivided land’s value.
- Consider hiring a professional to do a feasibility study. If you are handling a single lot subdivision into two or more residential lots, landowners should work with a local land and development expert who can conduct expert due diligence to identify risks and the highest and best use of the property.
- Subdividing may require additional infrastructure. Consider a large suburban home site that you would like to subdivide and then develop. In some areas, homes on larger lots can be serviced by their own well and septic system, but smaller lots created by this subdivision may require new municipal water and sewer service. Considerations like access to city septic systems, deed restrictions, and existing HOA Covenants, Conditions and Restrictions (CCRs), must be taken into account before beginning the subdivision process.
- Subdivision still requires that you follow the rules. When subdividing a parcel of land, you should understand the local zoning requirements, from flood risk evaluation and infrastructure regulations to laws about livestock, natural resources, and water rights.
Overall, subdividing a parcel of land can increase the total value of the land and provide the landowner with flexibility to keep their home on a smaller lot while obtaining some income from selling the extra lots. Subdividing land can also boost the marketability of your land as residential real estate, especially as the Frederick area, grows.
However, you should be prepared (or hire someone) to conduct feasibility studies and brush up on the local zoning laws before planning a subdivision.
The MacRo team can help guide you through the process and provide expert advice along the way. To get more helpful information like this, subscribe to our blog by clicking the button below.
Rocky Mackintosh is President of MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He has been an active member of the Frederick, Maryland community for over four decades. He has served as chairman of the board of Frederick Memorial Hospital and as a member of the Frederick County Charter Board from 2010 to 2012. He currently serves as chairman of the board of Frederick Mutual Insurance Company. Established in 1843, it is one of the longest enduring businesses in Frederick County.