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Developing lots
Old 09-04-2018, 12:18 PM   #1
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Developing lots

I inherited a small house that sits on 2 acres of land surrounded by newly developed houses. 1/4 acre lots have been going for around $120K.

The lots we would like to develop would be (2) 1/3 and (1) 2/3 acre lots, i.e. big and with mature trees on them.

But the offers I have gotten are very low and somewhat insulting. The house is nice but small and comments have been along the order of "nice big lot but don't care for the house"

All the lots are on road frontage and also already have water/sewage hookups. So we would need to do surveying, zoning, etc.

But I have never done anything like this and have no idea how involved it would be. Is this something that can be done by an amateur or do I have to basically give it away?
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Old 09-04-2018, 01:09 PM   #2
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Contact home builders in your area. They are often looking for properties they can develop.
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Old 09-04-2018, 02:35 PM   #3
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Properties in the foothills here with older homes are selling for big bucks; investors just want to develop the lot and always tear down the existing structure, regardless of it's condition. You might have luck going that route (sell the land for it's development potential) and just ignore the structure's value.

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Old 09-04-2018, 02:42 PM   #4
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Contact home builders in your area. They are often looking for properties they can develop.

That's the problem. They are giving us low ball offers. I can clear 4% by renting the place after taxes, rent manager, etc. That's better than what I can get on ten year bonds.



Perhaps I can strike a deal with a developer for a percent of the profit? This would not entail any debt on their part so maybe that is the path. Problem is I don't know if anyone wants to go that route.
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Old 09-04-2018, 03:01 PM   #5
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$120,000 sounds like a lot. Where are these lots?
There are "view" properties here in Colorado that are currently selling from $80,000 to $135,000 with full improvements and really nice views. The lots are about a third of an acre and it is a hot market here. So maybe the low ball offers considering the work needed might actually be correct.
FYI, 10 year corporate bonds as of today: A rated 4.7%, Baa rated 6.06%.
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Old 09-04-2018, 03:39 PM   #6
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That's the problem. They are giving us low ball offers. I can clear 4% by renting the place after taxes, rent manager, etc. That's better than what I can get on ten year bonds.



Perhaps I can strike a deal with a developer for a percent of the profit? This would not entail any debt on their part so maybe that is the path. Problem is I don't know if anyone wants to go that route.
Your issue is with the amount of lots not enough for economy of scale so you need to find someone in love with a lot and willing to pay a custom builder.
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Old 09-04-2018, 03:52 PM   #7
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Significant amount of work for an amateur. I used to be a consultant to real estate developers. Iíll gather my thoughts and post some concerns.
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Old 09-04-2018, 04:06 PM   #8
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You could just go to city hall and ask for what paperwork is required if you wanted to subdivide. It might be as easy as telling a surveyor to pound in a few chunks of rebar at the corners and generate drawings. You wouldn't need to do any improvements right now. But if the right buyer came along, you could optionally get into that business. Of course you'd be selling the lots one at a time, but I don't see that's much of a problem if you're getting a better price.
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Old 09-04-2018, 04:28 PM   #9
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$120,000 sounds like a lot. Where are these lots?
There are "view" properties here in Colorado that are currently selling from $80,000 to $135,000 with full improvements and really nice views. The lots are about a third of an acre and it is a hot market here. So maybe the low ball offers considering the work needed might actually be correct.
FYI, 10 year corporate bonds as of today: A rated 4.7%, Baa rated 6.06%.

Madison, Wi
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Old 09-04-2018, 04:30 PM   #10
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You could just go to city hall and ask for what paperwork is required if you wanted to subdivide. It might be as easy as telling a surveyor to pound in a few chunks of rebar at the corners and generate drawings. You wouldn't need to do any improvements right now. But if the right buyer came along, you could optionally get into that business. Of course you'd be selling the lots one at a time, but I don't see that's much of a problem if you're getting a better price.

Nothing is "easy" here. I would have to contract for sidewalks around the entire place which will cost a bit. I agree, I have only 3 lots which have to absorb all the costs. But I could still rent and keep the house at basically the same rate so I could take a hit on sidewalks, etc.
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Old 09-04-2018, 06:02 PM   #11
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Madison, Wi
On one of the lakes?
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Old 09-04-2018, 06:08 PM   #12
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How would you pay for the infrastructure improvements and carrying costs until you move the finished product.

We were going to do a full refurbish / addition on one of our commercial buildings. Architects, structural, mechanical,more parking lot, zoning, land use, dealing with city / county government, ADA. It was a pain, in the end, it didn’t pencil so we sold the building.
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Old 09-04-2018, 06:21 PM   #13
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Nothing is "easy" here.
Well if nothing is easy there:

City may have some stiff requirements:

Property may need to be rezoned to a zoning classification that fits your proposed lot size. They may request that the existing house be included in the rezoning/subdivision. Zoning has building setbacks and other requirements that need to be followed. Rezoning would probably require a preliminary meeting with city planning staff, an application and fees, and one or more public hearings.

Then they may require a preliminary plat. This is a subdivision plan showing lots, their dimensions, maybe existing topography. You would need to hire a surveyor for this. This plat gets submitted to the city (with fees) for review.

The surveyor would also prepare a final plat showing lots and their dimensions, proposed easements, and signature blocks for all entities that need to approve the plat. And also stake the lots. Final plats usually go through the public hearing process. After the plat is approved, all signatures must be obtained.

The city may require park and school donations on a per lot basis as part of the final plat process. In addition to application fees.

They may also require public improvements as part of the submission process. These include sanitary sewer and water utilities (or service lines to existing utilities). Street widening and sidewalks could also be required. Maybe storm sewer. Possibly a storm water detention pond (I doubt it in this case)

You would have to hire a civil engineer to address these issues and prepare a set of construction plans for the improvements. The city may require a bond for these improvements. And the city may charge the developer for the city consultant to review the plats and plans.

Once the plat and plans are approved, the city will sign and approve the final plat. Once you obtain the remaining signatures, the plat is recorded at the county recorder of deeds. At this point, the lots can be sold, with deeds having legal descriptions referencing lots in the recorded final plat.

But this is not the end. The developer needs to hire contractors to install the improvements shown on the plans. After the improvements are installed, they must be approved by the city - then the bond can be released.

Developer has to get electric, gas, telephone, cable utilities. These are generally not shown on the plans to the city.

A few other things to think about:

Any part of the property in flood plain or wetlands?
Will the City go berserk if trees are to be cut down as part of the development?
Any reason to believe that neighbors will oppose the subdivision and rezoning?
Any title issues on the current property - easements, liens, mortgages, etc.

This is generally what I went through for a typical city subdivision. My advice would be to go talk to the city planning staff to see what they would require for your subdivision.
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Old 09-04-2018, 06:30 PM   #14
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Originally Posted by Ronstar View Post
Well if nothing is easy there:

City may have some stiff requirements:

Property may need to be rezoned to a zoning classification that fits your proposed lot size. They may request that the existing house be included in the rezoning/subdivision. Zoning has building setbacks and other requirements that need to be followed. Rezoning would probably require a preliminary meeting with city planning staff, an application and fees, and one or more public hearings.

Then they may require a preliminary plat. This is a subdivision plan showing lots, their dimensions, maybe existing topography. You would need to hire a surveyor for this. This plat gets submitted to the city (with fees) for review.

The surveyor would also prepare a final plat showing lots and their dimensions, proposed easements, and signature blocks for all entities that need to approve the plat. And also stake the lots. Final plats usually go through the public hearing process. After the plat is approved, all signatures must be obtained.

The city may require park and school donations on a per lot basis as part of the final plat process. In addition to application fees.

They may also require public improvements as part of the submission process. These include sanitary sewer and water utilities (or service lines to existing utilities). Street widening and sidewalks could also be required. Maybe storm sewer. Possibly a storm water detention pond (I doubt it in this case)

You would have to hire a civil engineer to address these issues and prepare a set of construction plans for the improvements. The city may require a bond for these improvements. And the city may charge the developer for the city consultant to review the plats and plans.

Once the plat and plans are approved, the city will sign and approve the final plat. Once you obtain the remaining signatures, the plat is recorded at the county recorder of deeds. At this point, the lots can be sold, with deeds having legal descriptions referencing lots in the recorded final plat.

But this is not the end. The developer needs to hire contractors to install the improvements shown on the plans. After the improvements are installed, they must be approved by the city - then the bond can be released.

Developer has to get electric, gas, telephone, cable utilities. These are generally not shown on the plans to the city.

A few other things to think about:

Any part of the property in flood plain or wetlands?
Will the City go berserk if trees are to be cut down as part of the development?
Any reason to believe that neighbors will oppose the subdivision and rezoning?
Any title issues on the current property - easements, liens, mortgages, etc.

This is generally what I went through for a typical city subdivision. My advice would be to go talk to the city planning staff to see what they would require for your subdivision.

you hit it just about on the head. I do believe the city wants to "in fill" residential areas vs more farm land being developed so that should be in my favor. All the lots have water/sewage hook up installed (my dad made the city do this when they built a road between our land and the neighbor who sold out to a developer. I know what the zoning is and we can meet all of those criteria. Also understand the park fees, hookup fees, fees for this that and oh just because fees. So there will be no issue with utilities on any of these lots or zoning. My main thing is the sidewalks that have to be built. This could run fairly high. My brother and I can front the money (around $70K) and we should gross at least $370K from 3 large lots that we have. That leaves us with $300K plus we still have a rental house. Offers we have had top out at $350K for house and land.
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Old 09-04-2018, 06:41 PM   #15
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you hit it just about on the head. I do believe the city wants to "in fill" residential areas vs more farm land being developed so that should be in my favor. All the lots have water/sewage hook up installed (my dad made the city do this when they built a road between our land and the neighbor who sold out to a developer. I know what the zoning is and we can meet all of those criteria. Also understand the park fees, hookup fees, fees for this that and oh just because fees. So there will be no issue with utilities on any of these lots or zoning. My main thing is the sidewalks that have to be built. This could run fairly high. My brother and I can front the money (around $70K) and we should gross at least $370K from 3 large lots that we have. That leaves us with $300K plus we still have a rental house. Offers we have had top out at $350K for house and land.
Sounds like you have a great understanding of the process and are on to a great start. I've seen some cities allow sidewalks to be installed at a later date - after home construction. The thought is that house construction (concrete trucks, etc) damage sidewalks in the process.

However since your site is an infill site, it makes sense that they would require sidewalks to fill in the missing segment of sidewalks as soon as possible.

Good luck in your endeavor!
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Old 09-04-2018, 07:32 PM   #16
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Would it be better to knock down the existing home? Then a new home could be constructed? Newer = better? How are the trees situated? It's been a year or 2 but for a period activists would camp in trees so they could not be cut down. This is Portland. They protest a lot. We walked out of a hotel last weekend and stepped right into a march. What is killing infill builders now is half street improvements. Not just sidewalks but sewer & curbs on unimproved streets. IIRC it's $11k/foot
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Old 09-04-2018, 07:35 PM   #17
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Originally Posted by Ronstar View Post
Well if nothing is easy there:

City may have some stiff requirements:

Property may need to be rezoned to a zoning classification that fits your proposed lot size. They may request that the existing house be included in the rezoning/subdivision. Zoning has building setbacks and other requirements that need to be followed. Rezoning would probably require a preliminary meeting with city planning staff, an application and fees, and one or more public hearings.

Then they may require a preliminary plat. This is a subdivision plan showing lots, their dimensions, maybe existing topography. You would need to hire a surveyor for this. This plat gets submitted to the city (with fees) for review.

The surveyor would also prepare a final plat showing lots and their dimensions, proposed easements, and signature blocks for all entities that need to approve the plat. And also stake the lots. Final plats usually go through the public hearing process. After the plat is approved, all signatures must be obtained.

The city may require park and school donations on a per lot basis as part of the final plat process. In addition to application fees.

They may also require public improvements as part of the submission process. These include sanitary sewer and water utilities (or service lines to existing utilities). Street widening and sidewalks could also be required. Maybe storm sewer. Possibly a storm water detention pond (I doubt it in this case)

You would have to hire a civil engineer to address these issues and prepare a set of construction plans for the improvements. The city may require a bond for these improvements. And the city may charge the developer for the city consultant to review the plats and plans.

Once the plat and plans are approved, the city will sign and approve the final plat. Once you obtain the remaining signatures, the plat is recorded at the county recorder of deeds. At this point, the lots can be sold, with deeds having legal descriptions referencing lots in the recorded final plat.

But this is not the end. The developer needs to hire contractors to install the improvements shown on the plans. After the improvements are installed, they must be approved by the city - then the bond can be released.

Developer has to get electric, gas, telephone, cable utilities. These are generally not shown on the plans to the city.

A few other things to think about:

Any part of the property in flood plain or wetlands?
Will the City go berserk if trees are to be cut down as part of the development?
Any reason to believe that neighbors will oppose the subdivision and rezoning?
Any title issues on the current property - easements, liens, mortgages, etc.

This is generally what I went through for a typical city subdivision. My advice would be to go talk to the city planning staff to see what they would require for your subdivision.
OP if nothing else you will have an answer to the question "What do you do all day?"
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Old 09-04-2018, 09:05 PM   #18
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OP if nothing else you will have an answer to the question "What do you do all day?"

Great response. I don't know if I want to be a "developer". Maybe it's because I'm a Naval Aviator and am prone to getting the best deal I can. Do I REALLY want to do this? I'm not sure. But I'm retired, the city hall is .25 miles away, and maybe this would be a great opportunity to get active in the political/me vs city hall quarrel. But is it worth "fighting city hall"??



Sell it and forget about it, or bust my ass and get a better deal?


I'm conflicted about it.
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Old 09-04-2018, 09:30 PM   #19
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Just a thought.....I would look into forming a corporation or limited liability company to protect your personal assets in the event of a legal action against you if you decide to go forward with the project. Also, look into insurance. Also think about taxes on future profits.
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Old 09-04-2018, 09:52 PM   #20
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We are in the same situation with 2+ acres except our lot size is set at 7000 sf. Getting lots of offers to buy our house & property but I don't think they are developers. I think they are speculators trying to buy and sell quickly for a profit. If we decide to sell then we will get close neighbors.
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