This episode dissects a 150-acre Oklahoma subdivide opportunity where thorough analysis revealed the difference between spreadsheet optimism and market reality. The land investor presented a detailed 15-parcel play projecting $1.6M in exits from an $800K purchase, but after stress-testing absorption rates, recent comps, and realistic hold times in the current macro, Chris calculated true exits closer to $1.2M—still 2X margins, but requiring either $550K-$600K purchase price or creative structures like seller financing to justify the risk.
Key Takeaways:
- The Five-Step Subdivide Filter Eliminates 95% of Bad Deals Check for existing child parcels (never be first mover), verify 2X absorption rate versus parent parcels, confirm 1.5X minimum PPA increase, assess adverse selection across splits, then calculate true all-in costs.
- Price Per Acre Breaks Down Below 5 Acres For child parcels under 3-4 acres, abandon PPA models entirely and use flat per-parcel pricing—small-lot buyers don’t think in price per acre, making PPA comps unreliable.
- Discount Comps Over 6 Months Old Aggressively In this macro, anything beyond six months lagging is suspect; 12+ month comps should be thrown out entirely as markets have shifted too dramatically for historical data to predict current absorption.
- Introducing 15 Parcels Requires Undercutting Everything When flooding a market with inventory, you must price below all active listings just to move product in reasonable timeframes—the land investor’s projected $10K/acre became $8K/acre after accounting for competitive positioning.
This episode demonstrates why subdivide complexity demands conservative underwriting and why “it looks good on paper” destroys more capital than almost any other investing mistake.
(Podcast transcript below)
Welcome to Get Serious. I just taught this new workstation setup. Hope you guys are appreciating better quality, audio, productivity is just feeling great at the moment. I’ll try to show a new picture of this in upcoming newsletter with the new setup. I’m sure you can all appreciate. Today, I just wanna touch on sub-do ads again. Honestly, we could probably talk about this topic every single podcast and…
you know, never, never run out of content here. even if like the same principles keep coming up and up and up, again, just because almost nobody, almost nobody is great at this and it’s really, really hard to do well. so I just want to mention this case study, that was sent over to us, earlier today. So it was this Oklahoma deal about 150 acres.
And it kind of immediately took my eye here. And the vast majority of properties that are sent over to us as potential sub divides either don’t make sense as a subdivide in the first place, or, you know, it’s just price, you know, very inappropriately or like the market just doesn’t justify the opportunity potentially from a parent
parcel or a child parcel perspective. Again, you can look up my newsletter on serious land or capital for the five step subdivide process that you can use that will set you in the right direction 100 % of the time. And you’ll have to solve the rest of the nuances, maybe the last 10 % of any particular deal. But, you know, first check if there is our existing child parcels in that area. You don’t want to be the first mover.
Or certainly we would not want to be. If you want to try being first mover, be my guest in an area. Next, you’re checking to see the absorption rates for the child parcels. know, whatever amount of splits that you’re doing, there at least, is there at least that multiple of child parcels being sold in that area compared to the parent parcel? Like, let’s just do a single split.
for reference here, if you have a 10 acre piece splitting it into two, five acres, then I would want to see at least two times as many sold comps within the last 12 months, ideally the last six months compared to parent parcel sizes in the market. And kind of the inverse of that for active markets. So if there’s a ton of child parcels available.
But a minimal amount of parent parcels you’d want to be more cautious there and then I want to see is the price per acre on the child parcels at least 1.5 X What the Purchase price is for The parent parcel as well and then Step did I do?
Look at this. are are live here.
Ladies and gents, I’m wondering, did I just forget my-
Fourth step. Let’s see. adverse selection. Of course. So yeah, if I’m splitting up the parcel, do I have one parcel that has like way worse terrain or is flood zone or wetlands, what have you, that’s going to impact the PPA. And then finally, just know your true all in costs. So this you only need to do when you’re much further down, like you have the first four steps accounted for is like, okay, what does it take from a survey or.
you know, the water installation costs or, are you going to have to do culverts across all your child parcels to, you know, compete against the existing sold comps, in terms of valuation perspective or against active, properties and so forth, like, engineering, do you have to do any of that? So once you can solve all five of those, you’re on the right pathway for, for subdivide see
It’s good for me to repeat this as well, since I just brain farted on, one of the steps there. so this is the process that we’re using every, every single time. And we have just been, cause we’re doing a lot of on market deal reviews at the moment, for potential subdivide. And so we’re using this process daily, every single day, multiple times. Like you just, takes reps, the boring reps do this well. And so again, we got this Oklahoma property, 150 acres, about, you know, get two, two streets. So you had a really solid.
Road frontage, no real adverse selection across all of these. Multiple child parcels that had sold within the past few years right across the street on kind of both sides of the property. Very, very interesting market, like not a ton of active inventory or like other subdivide plays that just weren’t selling. So pretty interesting from from that perspective. The absorption rate wasn’t
rate. So this is where I pushed back on this particular subdivide, but the land investor who sent us over this deal did a really, really thorough analysis. So again, I want to give kind of kudos to that and recommend, you know, if you’re sending stuff to us, like, yeah, prep a full spreadsheet. And this guy, you know, had put together, you know, it’s supposed to be a 15 parcel play like between two and a half acres all the way to a 60 acre child parcel. kind of liked the diversity.
Um, so you’re not saturating too much of each, uh, particular market here. Um, and then he was showing comps for each kind of slice of the market, you know, the two and a half acres to the five acres of 10 acres, the 60 acre and finding comps. Um, did find a number of comps that were well over 12 months lagging. And I’m generally going to throw those out as a rule. And in this macro, anything beyond a six months lagging is already very suspect. Um, so, but.
Nevertheless, there were some solid recent comps that showed a relative consistency with price per acre. And so, he was expecting, okay, this is 800K by price can sell for just over 10K per acre blended across all the child parcels for like a little over 1.6 million, which is what the 2X that we’re looking for, right? So could be pretty interesting on paper.
And I spent a long time reviewing this one. Again, if you kind of run through your initial test and just see, this is an interesting asset here, like take your time. Don’t rush the process. Like there’s way too many folks, you know, especially, you know, for complexity, like subdivides, I know I people say, yeah, it’s easier and you chop it right up.
But if you don’t understand the market, you are going to destroy yourself in, especially in a nasty buyer’s market like this across much of the country. So I probably spent, you know, roughly an hour ish on the on the initial review. And, you know, that’s what it takes to review these type of. And again, I’ve been doing this for years and years and years and probably can move a lot faster than a lot of folks. So if you take two to three times as long as me, it doesn’t matter.
Because you’re going to get the reps in like I still have to do the boring work. There’s no shortcuts. There are no shortcuts remember that to Getting and reviewing good deals like you have to put the time in you can’t make Assumptions when there’s hundreds of thousands of dollars millions of dollars on the line That remains true no matter what level you’re playing at so
You know, and again, like I was appreciative of the level of effort put in by this particular land investor. so, okay, let me give this one a real honest shot here. Let me stress test pretty much every angle of this thing to see what the potential might be.
based on the market absorption and utilizing the more recent sold comps as well as, you know, I disagreed a bit on some of the adverse selection of some of the land that had sold and, you know, looking at hold times and so forth. And like the hold times weren’t that bad on a lot of these sold comps. A lot of them were moving in sub six months or so. And so, you know, if we were going to introduce, and there was really only,
one, maybe two other subdivide projects in the area. And it looked like they were mostly concluded as well too. So like there was precedent that it could be done. And, you know, taking a deeper look at this particular market, I’m like, if we were supposed to, you know, plan to move this in six to 12 months here,
what could be, you know, realistic as far as pricing. so I just, I back down on the exit per acre pricing, like pretty much across the board. And plus, again, when you get into like two, two and a half, three acre, three and a half, even four acre parcel sometime, like price per acre becomes far less reliable. And
much harder to kind of differentiate and build a kind of consistent pattern with what you might be able to achieve on that. So, you know, at those levels, you kind of have to use just flatter per parcel pricing rather than per acre pricing. And, you
also have to combine that with the fact that you’re introducing all this inventory to the market here. And if you’re expecting to move this in any reasonable part of time, like you have to undercut virtually everything. And when there’s not much of a distinction in terms of characteristics, like it’s all pretty much like flat land that have similar access to utilities. You’re not really going to be able to stand out again, very few properties are
far more like that, really outweigh from a superior perspective. Like, unless it’s just like tremendous waterfront sometimes, or like the view is spectacular, but most of the time people overestimate the quality of the property characteristics. So with all of that in mind and needing to undercut and potentially moving 15 child parcels, or you could do less child parcels.
to have less inventory to move, but that might still have a negative effect on the PPA for the movement of or the kind of final exit price for all of the acreage. it’s kind of a mixed bag and it might just be a wash as far as strategy that you could pursue there. And like this is again, like pre-reeltor everything. I ended up closer to like 8K per acre.
20 % off ish roughly. So my total exit was like a little north of 1.2 ish million is what I thought was more realistic. So, you know, buying it 800 grand, some folks would look at that and say, yeah, no problem. You know, buy for aid potentially like a conservative 400,000 in profit, but at the opportunity cost still the inherent market risk.
this type of macro, how long it could take to move like that is a lot of money to tie up. so I went back and they’re like, yeah, if you could get this seller, I don’t know how motivated they are. They just listed on market. could you get them to 550 to 600 K, for a cash deal? That would be very, very interesting to us. Like not that far off. Most people are off by, you know, a hundred percent of, of, the value of the deal. or like.
I’ll come back at like half of the price they might have. So this one, I was, you know, 20%, I would have thrown a discount onto it. Like not, not that far off. So very, very interesting there. And if the seller didn’t want to accept that particular cash deal, I also suggested, hey, like this could be worth looking at from a seller finance perspective. Again, they’re on market. Who knows if they would consider something like that or potentially JVing with the seller.
to not get us any debt that we had to overcome from a seller finance perspective and much lower cash into the deal for potential higher cash on cash returns, but from an absolute upside perspective, far less as well too. So a few different options because quality leads like this are hard to come by.
So you may as well explore what’s on the table. So TBD from that, again, rehashing tactics for subdivides could be like just the, again, what we do with this podcast every single time here. But I think like each of these case studies helps clear things up even more on what to look at for both my own sake as well as your sake too.
because until I see the industry just routinely crush it on subdivides and price them properly, I’m just gonna have to keep pounding this in again and again and again. Because again, it’s complex. Don’t let anybody tell you otherwise here. The days of finding just incredible subdivides that just require no brain power to…
to get a killer deal on just probably not out there. And we were looking at a lot on market stuff. Like it’s slim pickings and a lot of parent parcels are just overpriced. It’s another discussion. But just again, key warnings to be careful out there. Stick with our five step subdivide process. It will not steer you wrong anywhere in the country, no matter what type of parent parcel you’re looking at.
and then you can price accordingly. So with all of that in mind, send us more sub divides. We looked at millions of dollars worth of them this week. I have more that I need to review here shortly. SeriousLand.Capital for any of your funding needs, land daily diligence, Facebook group, subscribe and share everybody. Take care now. Bye.
