This episode establishes aggressive disposition timeline targets for subdivide projects, prioritizing capital velocity over maximum profit extraction. The framework targets sub-6-month sales for individual parcels when pricing below market, though 12 months conservative estimates account for market volatility and adverse selection risks. For multi-parcel subdivides (5-6 child parcels maximum for efficient turnover), staggered marketing strategies prevent market saturation while varying acreages target different buyer segments, though anything beyond six parcels typically extends timelines past 12 months even in strong markets due to seasonality shifts, inventory absorption rates, and inevitable less-desirable parcels within the mix.
Key Takeaways:
- Price Every Parcel for Sub-6-Month Sales, Plan for 12: Aggressive below-market pricing targets 6-month exits per child parcel but conservative planning assumes 12 months total for complete portfolio liquidation to account for seasonal shifts, market changes, and slower-moving inventory within the subdivide.
- Five to Six Child Parcels Maximum for Capital Efficiency: Beyond six subdivided lots, disposition timelines routinely stretch past 12 months even in active markets due to inventory saturation, adverse selection on less desirable parcels, and inevitable seasonal cooling periods during the extended marketing window.
- Undercut Sold Comps That Took 6+ Months to Move: If comparable sales required more than six months to go under contract, price materially below those transactions, but comps that sold within 1-2 weeks indicate you’re at market-clearing levels and aggressive undercutting isn’t necessary.
Tune in for the complete breakdown of staggered marketing strategies, varying acreage approaches, and how to balance pricing aggression against profit margin preservation in subdivide projects.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner, continuing our minor subdivide series. I was halfway through this episode and the recording software stopped suddenly. having to restart here. But our previous episodes that we’ve gone over, we were talking about our, you know, target for margin on subdivide deals, preferred.
diligence periods on a contract, what we’d like to see when we’re presented with a deal, our general funding requirements, which tend to be pretty low. And now we’re gonna be talking about disposition timeline targets. So this is where…
you’re probably going to have pretty big discrepancies between funders or general operators when it comes to subdivides here. I’d say from the funder perspective, most of us, whether we’re equity funders or debt funders trying to get, and I’d say even more so for equity funders here, it’s a capital intensive business. So we’re trying to exit our investments ASAP, probably whenever possible.
And, you know, trying to sell our finance out deals on the Dispo side usually is going to cause a lot of problems unless you have a note buyer on the backend to cash you out of the deal. Otherwise, you have the continuous injection of capital required to keep the wheels turning within a equity funding business is going to be difficult to manage here.
We’re always trying to price on under market when possible. Most deals we’re trying to price for sub 90 day sales. It’s not always going to be possible. So more conservatively, it’s probably, you know, six ish months, sub six months to actually sell something. When it comes to. And that’s just for a single parcel for subdivides when you’re dealing with.
Possibly multiple child parcels, know, maybe it is just a two parcel split Three parcels four parcels. It could be ten parcels If you’re adding a lot of inventory into the market naturally, you have to increase the anticipated length of time that It’s going to take to dis bow all the properties especially if they’re of similar acreage and you might saturate the market or you might want to stagger the marketing of each child parcel that you have
to reduce the supply and try to increase the demand. So there’s a number of strategies associated with that, or you can try to cut up your subdivide into different acreages to try to appeal to different buyer types and still achieve a profitable exit price per acre blended. Even when we’re doing a subdivide project, probably…
Five child parcels or less. I still want to try to price it for a six month exit Conservatively You know that might not always happen and you know, this is land that things things can happen things can turn out of dime Pretty quickly a market tries up. We’ve been there. We’ve seen it. It’ll continue to happen So, you know you have to reset expectations as needed, you know so, you know if you’re looking to
to price the exit in six months, know, maybe conservatively double that for how long it might actually take when you’re actually trying to consider your opportunity cost before getting involved with the deal. So from our business, 12 months conservative total exit is usually going to be our maximum target. We’ve actually never held an asset for longer.
than 12 months, there’s only been a handful that have even gone over nine months of total hold time. So we really try to price and move things aggressively.
So with that in mind, sometimes we’ll be presented with projects that folks might be estimating 12 to 18 months. I rarely see more than 18 months whole time, maybe 18 to 24, if it’s a really significant project, 15, 20 child parcels, sizable investment, maybe a slower of a market here to really turn through everything.
But yeah, I’m just, that’s not gonna be as appealing to me generally. You know, if you’re running a business that you’re kind of seller financing a lot of properties out, maybe they’re lower cost on average and your basis is a bit lower, cost of capital is lower. That could make a little bit more sense. Otherwise, yeah, I would like to churn the properties much faster. Can we cut that Dispo timeline in half just by listing things?
lower or reconsidering our child parcel strategy to cut up the parcel into less if my anticipated price per acre is still going to be roughly the same or maybe slightly less, but I can still move my properties faster and still hitting roughly closer to that 2X anticipated gross margin. Or can I do some additional value add on the various child parcels
where I can bump the exit PPA and make it more attractive from a days on market perspective, get more buyers interested early on, even if it’s costing more upfront money. So those are additional items to keep in mind and way before you consider a property further there. So as you can see, a lot of discrepancies here, but for us,
I’d prefer to keep conservative Dispo timelines at 12 months or less Try to price for sub six months and that’s inclusive of subdivides. And again probably saying five to six child parcels Roundabouts for that number if you get above that it can start getting a lot trickier Unless the market is just you know, really kind of roaring and people are moving a lot of child parcels in a quick
period of time, I’d say that’s fairly rare in our experience. Anything more than that, you know, five or six child parcel strategy can, you know, oftentimes take at least a year, maybe a bit more to offload everything. Maybe some sell very quickly. You might run into some adverse elections and some properties that are less appealing, saturate the market, maybe seasonality changes. Just takes longer to move for whatever reason. So, you know.
That’s why, yeah, you might want to just be a bit more conservative when it comes to trying to adjust your dispo strategy and what that anticipated list price is going to be. you know, that’s why it always comes back to you. Generally, can we list below what the active market is and potentially even list below what the sold comps were, especially if they took a while to sell, if they took north of six months.
move then I definitely want to undercut the price if they took you know if they went under contract and they have similar characteristics within a week or two or even a month then I know I’m probably pretty in line with a price breaker perspective there so that’s how I would judge the anticipated timeline and how we might try to approach the pricing of those properties
So hopefully this one helps here. Again, if you’re looking for funding, subdivides or not, a serious land dot capital or zero cost review of your land deals at land daily diligence, Facebook group and landpricer.ai for the most simple and accurate way to price land. Take care, subscribe and share. Bye.
