$1.9M
Initial Land Value
27 Months
Subdivision Approval Timeline
$3.99M
Sale Price after Approval
Introduction
In March 2022, we began representing clients who owned a 99-acre parcel of land in Lovettsville, Virginia. The land existed as a single parcel with no improvements, but it met basic requirements to be eligible for subdivision under existing zoning. Based on comparable sales and offers we solicited for an immediate “as-is” sale, we estimated the initial land value to be $1.9M.
Instead of accepting an “as-is” offer, our clients wanted to determine if they could add value to the land by securing Loudoun County approval for a subdivision and positioning the land for development. We scheduled a pre-application meeting with county planners and confirmed that there was a viable path to getting a subdivision approved.
27 months later, our clients obtained site plan approval and sold the subdivision to a developer for $3.99M.
This success story shows how you, as a landowner, can add major value to your land without investing in major physical improvements.
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The Subdivision Process
The requirements for subdividing land will vary depending on the jurisdiction where the property is located, the size of the subdivision, underlying zoning district regulations, and site-specific conditions, among other things.
In this case, the subdivision process was a two-step process: Preliminary Plan Approval followed by Site Plan Approval. Each of these approvals carried its own set of requirements, as described below. Notably, this was a relatively straightforward “by right” subdivision that did not require rezoning or special exception. If such steps had been necessary, then the subdivision process would have been longer, riskier, and more expensive.
STEP 1: Preliminary Plan Approval
Preliminary plan approval marks the point at which the governing jurisdiction has reviewed and approved the concept plans. The requirements for securing preliminary plan approval will vary depending on the jurisdiction, zoning district, intended use, and site-specific conditions, among other things. In this case, preliminary plan approval required:
STEP 2: Site Plan Approval
Site plan approval marks the point at which the governing jurisdiction has reviewed and approved all requested revisions to the preliminary plan, along with detailed construction plans, the deed of subdivision, and HOA documents. At this point, the subdivision is considered “record ready,” meaning it can be recorded in land records and bonded for construction. In this case, site plan approval required:
The Approval Timeline
In general, the time to obtain site plan approval (i.e., “record ready” lots) depends heavily on local planning and zoning requirements and the efficiency of the review process.
To cite one example of a local zoning requirement that extended the approval process for this subdivision, Loudoun County requires hydrogeologic studies for subdivisions of 10 or more lots supplied by well water. The county also required our clients to drill six test wells prior to preliminary plan approval.
Ultimately, our clients received site plan approval in 26 months, which is normal for a cluster subdivision of this size (19 lots) in Loudoun County. In some jurisdictions, a similarly sized subdivision could receive approval in as few as 9-12 months. In others, it could take 30 months.
To summarize the approval timeline for this subdivision:
|
Milestone |
Date |
|---|---|
|
Project Start Date |
March 2022 |
|
Pre-Submission Meeting |
April 2022 |
|
Preliminary Plan Submission |
December 2022 |
|
Preliminary Plan Approval |
April 2023 |
|
Site Plan Submission |
June 2023 |
|
Site Plan Approval |
May 2024 |
|
Sale of the Subdivision |
June 2024 |
Subdivision Costs & Financing Considerations
Although land subdivision requires relatively little investment in physical improvements, the soft costs can be significant. In this case, our clients invested roughly $435,000 in soft costs (engineering, management, environmental studies, legal, permitting, accounting, etc.) and $180,000 in hard costs (the majority invested in well drilling).
Financing subdivisions can be challenging, as traditional lenders typically do not lend on land unless the loan is tied to physical improvements. However, for landowners who are unable to self-fund the cost of subdividing their land, there are alternative funding structures to consider. One common structure is a joint venture in which the landowner contributes the value of the land, a development partner finances and manages the subdivision process, and each receives a profit share upon the sale of the subdivision.
The Broker’s Role
An experienced land broker can be an indispensable partner as you subdivide your land and position it for sale to a developer.
In this case, LandReady provided several services critical to the success of the project.
Investment Funding
LandReady negotiated an investment partnership that ensured our clients could profitably complete the subdivision while paying a fair return to the investors.
Consultant Management
LandReady assembled a full team of consultants, collected and negotiated bids, and managed consultants through project completion.
Offer Solicitation
Early in the process, we privately solicited offers from our expansive buyer network, ranging from local builders to national developers. By the time our clients were ready to sell the subdivision, we had letters of intent from eight prospective buyers. This put our clients in an excellent position to negotiate the best deal possible.
Contract Negotiation
Development land sales are complicated. Contracts can exceed 40 pages, with numerous “outs” for the buyer. LandReady negotiated a contract that included strong protections for our clients and a sale price that enabled them to repay their investment partners a higher return than projected.
Key Considerations for Landowners
In the right situation, land subdivision is a great way to quickly increase land value. To determine if land subdivision is a good option for you, here are some key considerations to keep in mind.
Subdivision Potential
Your land should meet basic minimum requirements to be eligible for subdivision. This means the land is appropriately zoned (or can be rezoned with a high probability of success) and physically suitable for development.
Subdivisions Costs
Subdivision costs vary depending on zoning and regulatory requirements. In the above case study, the county required a hydrogeological study and six test wells prior to approving the preliminary plan. This added roughly $100,000 to the cost of obtaining preliminary approval.
Market Demand
Before you invest in land subdivision, you should understand the market to ensure the lots you intend to create will sell for a price that justifies the costs and risk you will incur during the approval process. If you’re unsure about market demand and current lot pricing, you should consult with a land broker.
Funding Structure
If you cannot self-fund the cost of the subdivision, or if you feel you do not have the experience to execute the subdivision by yourself, then consider a joint venture with a development partner. This can reduce your risk while preserving ownership interest, which enables you to enjoy some of the upside from the sale of the subdivision.
Free Property Evaluation
Not sure if your land is suitable for subdivision or development? Get started with a free, no obligation property evaluation.