This episode establishes frameworks for evaluating major subdivide potential (50+ home sites minimum for national builders) by analyzing nearby subdivision precedents within a one-mile radius. The critical market validation signals include finding comparable major subdivides that are 80%+ improved (not stalled at 20% buildout suggesting regulatory or utility issues), with homes built within the last 15-20 years demonstrating recent buyer and builder demand. Additional location factors include highway proximity (two turns or less to major routes), quality school districts, distance to city centers and emergency services, plus confirmation that utilities can be extended cost-effectively without major infrastructure gaps.
Key Takeaways:
- Never Be the First Major Subdivide in an Area: National builders (except DR Horton) won’t pioneer undeveloped territories, so finding 80%+ improved comparable subdivisions within one mile with builds from the last 15-20 years validates that builder demand and infrastructure capacity actually exist in the market.
- Stalled Subdivisions Signal Fatal Flaws, Not Opportunities: Nearby major subdivides showing sub-20% improvement rates indicate regulatory barriers, utility cost overruns, or market demand failures that will affect your project, making these areas strictly avoid unless you have insider knowledge of what went wrong and how to circumvent it.
- 50+ Lots Minimum, Paper Lot Strategy Preferred: Most national builders won’t consider projects under 50 home sites, so use option contracts to de-risk capital while pursuing entitlements to create paper lots for builder sales rather than attempting full horizontal and vertical development yourself.
Listen to the full episode for detailed builder contact strategies, paper lot pricing frameworks, and how to reverse engineer major subdivide economics before committing capital.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, Vacant Land Funding Partner, continuing with our subdivide series here. This time we’re going to dive a little bit into major subdivides. That’s a really complex topic, deserving of its entire own series, but I wanted to touch on a few points.
If you’ve missed some of the early parts of the series, we initially had discussed what type of margin we look for on subdivide deals, roughly 2X, preferred diligence periods, things that we like to have sent over to us when you’re submitting a deal, general funding requirements, DISPO timeline targets. So now we will touch on major subdivides.
So something that we built into land Pricer and because major subdivides again has so much complexity here is really trying to figure out, are there any nearby major subdivides that might’ve successfully been developed in the relatively nearby area? I don’t know, say.
radius of a mile, maybe a little bit less depending on how developed the area is. What I do know for certain is that you wouldn’t want to be a first mover when it comes to major subdivides. Even from the larger home builders out there, like DR Horton is kind of the only one, they’re the largest home builder in the country. And they’re kind of known for leading the way.
pretty aggressive negotiators to say the least from people that I know who’ve had dealings with them. you know, other, you know, even largely large public traded builders don’t necessarily have the financing to just trailblaze into an area to build out in a completely kind of undeveloped area from a major subdivide perspective.
you know, might be able to find some local builders as well there. So it’s possible you might be able to develop the right connections. but usually if we’re going to be considering possible major subdivide play, you know, thinking from a national home builder perspective is usually going to be preferred unless again, you have some type of connections. You might be the leverage in the area from builder side. So.
Most national home builders will not consider anything below roughly 50 home sites. Take that as a, again, not precise guideline of different areas of the country can be unique and some home builders will have their own cutoffs. But that’s just kind of a general guideline to consider.
you whatever parcel that you’re looking at, you want to make sure you could, you know, chop it up into at least 50 parcels, preferably more when, when possible and kind of just try to match it up to another, major subdivision within the area and make sure like the contour is relatively similar. You don’t have key terrain issues, wetlands are trickier.
you know, elevations or dips in the property that can make the cost to build much more significant for a builder. So you want to account for all of that and, kind of decrease some of the acreage from your consideration from a building perspective, if there are some of those concerns. But, you know, if you can find that there has been a major subdivide in the area, that’s like relatively the same.
total acreage size. That’s definitely a good sign though. You’d also want to check when was that major subdivide done. So usually if I see something in the area, I’m going to click on one of those properties that was presumably already improved upon and you really want to ensure, you’re looking at other major subdivides here. You know, a bad sign is that there’s no or
you know, very minimal improvements like sub 20 % of all lots have been built on. you know, there, there, there were probably some regulatory issues, utility cost overruns or, tricky aspects of the market that just made it, much more difficult for, that subdivision to
really get fully developed. if it’s like brand new, you have to weigh that a little bit more, but then you’re going to be running into some saturation risk. you know, usually from like a land investor perspective, you’re not expecting to do the full horizontal vertical build out. It’s just understanding, okay, what might be a good option, whether it’s just the raw land by itself or, you know, getting it through entitlements and into a paper lot set up to sell to a developer slash builder.
So if there’s been some difficulties in the market locally, especially in their relatively same neighborhood, that’s going to make it on average less attractive to a builder. But it’s kind of fully improved or in that direction all the better. But usually when I’m checking in on this, click on one of those improved lots and see when was that home built. Sometimes
Homes look a lot newer than they actually are when you click on some of these. Yeah. If they were built in the 1980s, 1990s, all of a sudden you’re considering, okay, yeah, there was a major subdivide here. People are still living here, but this was all developed 30 or 40 years ago. Is there still actually demand from a builder perspective and just an buyer perspective to even move in here? Or would there already have been?
additional build activity within the last few decades. The more recent, the builds in a kind of actively developed or improved upon major subdivide, the better, because then you have a better idea that, okay, this is more recent demand. The builder demand is probably going to be higher as well. So that’s something to consider. I’d say, you know, if there was a major subdivide done and most of
The homes were built within the last 15 to 20 years, probably in better shape to consider. So that’s something else that I would be on the lookout for if I’m first starting to consider the possibility of a major subdivide. yeah, what’s the street access? Do I know?
What the utilities look like, you know, initially you could make a couple calls. Okay. What, what’s again, we kind of discussed this in a previous podcast. What’s the capacity for public utilities to be brought to this area? Do I need it? You know, do you need to extend sewer lines, water lines, et cetera? Like how, how easy and simple is it? And, and, know, cost effective, is it going to be for a builder to actually extend anything over to the area?
You know, how close is it to a highway? I forget there’s some general guidelines you can use perplexity or Google for some of these, but usually it’s like two turns or something to a high or like two streets to a highway or something is going to be more favorable for builders to look at. You know, is it within like a more quality school system or school district rather?
how close is it to emergency services. Those are additional considerations and just like generally city centers too. So those are gonna be your guidelines. Again, every area is a little bit different and you can search on the internet for a couple of those key guidelines there. But yeah, mean, the closer you are to a metro or.
city center, usually you’re going to be in better shape and pay attention to where you are in relation to highways, particularly interstates or at the very least state routes or US routes. those would be some initial guidelines there. The actual setup of how you might get in contact with builders and trying to kind of reverse engineer the pricing. That’s going to be its whole other
conversation generally if we’re looking at like a major subdivide, yeah, I’d want to try to get the property under an option contract. So then you’re de-risking and I’ve talked about this prior, know, de-risk a lot of your involvement in the deal, decrease capital expenses, maybe you have to pay for some entitlements, and you get a builder to cover it. And you know, even getting in contact with the builders, it’s own hurdles there too. So,
but those would be additional steps to start to consider, but you know, when you’re initially just assessing the market, Hey, do you think this is even worth diving into from a major subdivide perspective, try to sell the paper lots and maybe you can find some additional comps that happen, you know, sold on the market or, know, are active on the market ones that are trying to sell from like a paper lot perspective. occasionally you’ll see that on the MLS. So you can see whether there’s.
any real activity there anyway. know, a lot of times these paper lot type situations will happen off market, but you know, not always. especially if there’s more local, developer builder activity for possibly a little bit smaller, subdivides there. So that’s just something to consider. If you have something that might be less than 50 lots, yeah, it could be, I’d probably stray away unless you know, you see there’s an active market for paper lots.
on the MLS or other listing platforms. So food for thought from that side, obviously a complex topic, but hopefully starts to shed some light here. SeriousLand.Capital for any of your funding needs for land deals. Check out Land Daily Diligence for zero cost review of your land deals. And LandPricer.AI for the most simple and easy way to price land.
Hope you subscribe and share. Looking forward to next time. Take care. Bye.
