In this episode, Chris reviews Land Daily Diligence submissions and exposes how investors chronically misjudge subdivide viability by ignoring market mechanics. Even perfect subdivision approvals fail when parent parcels sell faster, child parcel inventory doubles your market exposure, and price-per-acre appreciation doesn’t hit the required 1.5X minimum threshold.
Key Takeaways:
- Use the 1.5X Price-Per-Acre Rule Child parcels must reliably show 1.5X price-per-acre appreciation over parent parcels conservatively, or the subdivide math doesn’t work—most markets don’t support this even when approvals are easy.
- Inventory Multiplication Kills Liquidity A single split creates two properties requiring 2X the sold comps activity to justify market depth—if child parcels aren’t trading at double the parent parcel frequency, you’re flooding a thin market.
- The Five-Step Filter Eliminates 95% Check street frontage, setback compliance, existing child parcel examples nearby, sold comp ratios, and adverse selection risk—most “obvious” subdivides fail multiple criteria under scrutiny.
Catch the full episode for the framework Serious Land Capital built after thousands of property reviews that now filters out bad subdivide plays instantly.
(Podcast transcript below)
Welcome to Get Serious, a quick one today. So I was just reviewing a number of properties on land daily diligence, typically hosted on Mondays and Thursdays whenever we have a number of deals to take a look at. And I just can’t reiterate enough on how careful you have to be before you consider subdividing a property.
You know, so many folks think that there is a potential for minor minor subdivisions. It’s a sexy thing to do. And you think, OK, yeah, I can, you force some appreciation and get more money for, you know, the price of one effectively. And, you know, just how rare it is to truly do that well.
because you’re just so dependent on the underlying market mechanics. And even if you fully nail the potential for a minor subdivision, like sometimes the market’s just gonna tell you otherwise and you end up finding a much stronger market for the parent parcel anyway. So sometimes it’s just hard to even when we’ve purchased and underwritten a number of deals. And so like some quick guidelines again here is that
If you are considering a minor subdivide, like first understand everything that goes into it. What’s the cost? What’s the approval process? Do you have to go to any type of hearings, anything like that? Do you have the requisite street frontage to allow for a home to be built on the property within the setback?
Regulations what have you you know, just scan around the area. Are there other examples of child parcels that already exist? you know even within the You relative vicinity within like a couple mile radius ideally even less than that that give an indication that You know, you’re not going to be the first child parcels to market I Would rarely if ever want to be a first mover trying to do something like that
unless you just have a longer term hold and you’re willing to account for some extra risk here. But generally in landflipping, that is not the name of the game. So something to consider there. And then, you know, just looking at the sold comps, you know, when you have to account for, you know, doubling or potentially more the inventory that you’re bringing to market.
is there a more active market for child parcels in the first place? Like again, if you have one potential parent parcel and let’s just take a single split, you have two child parcels that you have to move. And you might have different acreage here, but more often than not, child parcels tend to have somewhat similar acreage to each other. So it’s like, okay, if I have…
More properties I’m bringing to market are there at least You know that multiple of of parcels that have moved on that market So, you know compared to parent parcels like are there you know 2x? The number of child parcels that have moved on the market You know within the last you know, ideally three to six months potentially going back to 12 months depending on
what you kind of look at, but you know, the ratio is kind of the same. So again, kind of consider that from a single split perspective. But you know, kind of multiply out from there, depending on how many child parcels you are bringing to the market. Even if it’s not like a direct, you know, two to one or three to one ratio, like potentially the child parcels are just moving faster, maybe they have much less DOM. So then you can kind of balance those different factors.
when you consider whether or not to potentially do a subdivide and then again price per acre, you know You have to be careful of that if you’re doing smaller child parcels like sub two to three acres roughly because then You know price per acre or per acre pricing really? Starts to break down. So you have to be more cautious of that
And it becomes just more of a raw price associated with acreage of any size roughly at those smaller, smaller acreage numbers. But if price per acre is relevant, then you do want to see actual appreciation for those child parcels. Like our rough rule of thumb is that you should be seeing at least a 1.5X reliably and conservatively on your
child parcel price per acre in comparison to parent parcels. And also being aware of adverse selection. Are some of your child parcels potentially more valuable than others or are they relatively uniform? So those are again just some quick guidelines to get an idea of whether a minor subdivision even starts to make sense here. Like I just went over this in five minutes.
that I see almost nobody do properly for deals that are sent over to us. And we’ve built up this expertise over thousands and of property reviews here. Subdividing is hard. Don’t, again, kind of take it lightly with the risk involved, especially in a more difficult real estate market like this.
So you can do it properly, but you have to be following the guidelines. Otherwise, just try to stick with a parent parcel and price appropriately. With all that in mind, serious land dot capital for any of your funding needs, 50K minimum purchase price and above. Land Daily Diligence Facebook group, I just mentioned. Subscribe and share everybody looking forward to next time. Take care now. Bye.
