Subdividing a piece of land involves breaking a larger parcel down into smaller parcels and then reselling each one separately.
This process is particularly lucrative when done in rural areas where buyers seek more extensive plots of land for development.
By purchasing a large parcel below market value and dividing it into smaller, more desirable lots, you are going to see a higher ROI than a normal land flip will offer.
Let’s look why subdividing land can be a great investing opportunity, and what you may come face to face with as you work your way through your first deal.
Five-acre properties are highly advantageous for many buyers, as they strike a balance between affordability and land size.
Subdividing a 50-acre parcel into ten 5-acre lots can yield substantial returns, often exceeding 100% of market value!
This strategy offers an impressive ROI, especially in rural areas, and involves minor subdivisions that require minimal effort.
To find suitable properties for subdivision, it’s essential to focus on rural areas with ample road frontage.
We recommend going after parcels with thousands of feet of road frontage to increase the ease of subdivision later on.
The process often begins with sending blind offers to property owners, aiming for 65-75% of market value. While it’s possible to hand-select deals, a shotgun approach involving higher-acreage properties with significant road frontage can lead to naturally suitable opportunities.
Subdividing may face challenges, such as if you’re not familiar with the county’s regulations or restrictions.
Depending on where your property is, there will likely be specific rules or regulations such as: minimum acreage, road frontage, and the need for public utilities.
Failing to research and understand these regulations can lead to approval delays or even the inability to subdivide a purchased property.
It’s also crucial to do research on the the feasibility of subdivision before committing to a deal.
Is the physical shape of the land suitable for building homes on? What are the financial costs involved? What does the land survey say about the property?
In the end, it’s all about scaling our business and getting a bigger payout. To maximize profits in subdividing, it’s crucial to think bigger and target larger acreages.
By going after substantial deals and continuously increasing the scale, investors can access substantial profits and potentially achieve generational wealth.
It’s a mindset shift that can lead to significant financial success.
Typically those who are ready to scale up their land flipping business still don’t have the capital to purchase a $250,000 property upfront.
Eventually you can reinvest into your business by funding your own deals. More often than not you are going to work with a deal funding partner, where they provide 100% of the purchase price, and a manager (you) handles the deal process from start to closing.
Nurturing these relationships throughout your land flipping career is essential to getting you bigger deals like subdivides.
Taking on challenging deals, even those worth $400,000 or more, are feasible with the right mindset and approach. Building relationships, assuring funding, and believing in the potential for substantial profits can lead to successful and lucrative land deals. Subdividing can be a pathway to financial transformation.
Dan: Welcome to the real estate investing podcast, where we help you unlock your potential freedom through land investing, real estate investing, and entrepreneurship. Hey everyone, welcome back to the real estate investing podcast. Today’s topic, we’re discussing making 500, 000 from one subdivide. I’m your host Daniel Apke joined again by my brother and business partner, Ron Apke.
Ron, first let’s talk about what is a subdivide. Let’s walk through some basic math just to open it up to someone who’s brand new. They’ve never done a subdivide. Maybe they’re new to land investing in they’re trying to get their first deal. Let’s introduce what a subdivide is because a lot of people think traditional subdivides.
You know, like a subdivision. So let’s talk about it.
Ron: Yeah. So, I mean, essentially like a subdivision is what you guys see in your neighborhoods, whether it’s, uh, every lot might be half an acre or something like that. At one point that was 50 acres and someone came in and subdivided that into 150 acre lots.
Or maybe I don’t know, 75, half acre, half acre lots and the other one street, whatever, um, what we talk about when subdividing, it’s a little, it’s bigger parcels in terms of bigger end results. And the reason being is, uh, less restrictions when we’re doing that. So if we subdivide something, we might be breaking up 50 acres into 10, 5 acre parcels, and we’re just selling those 5 acres off.
We can sell 5 acres very, very fast. But in short, it’s breaking, subdividing is breaking a bigger parcel into multiple parcels.
Dan: Absolutely. And why is, you know, why is it so sustainable? Let’s talk about the math behind how we get these subdivides and the sustainability behind it.
Ron: It’s just, it’s subdivides are, there’s so much opportunity in subdivides because you can buy that big parcel for so much money.
So where, if I’m buying 50 acres and I need to resell the 50 acres to make money, I need to buy that 50 acres at 50, 55 percent of market value when I’m subdividing that into five or 10, five acre parcels, whatever it is. I can maybe buy that 50 acres at 75 percent of market value, split it up and then sell it for a lot more because people are going to pay a lot more per acre if I’m selling five or 10 acres or even 20 acres opposed to that one big 50 acre parcel.
Dan: Exactly. And that’s the thing. So when you look at subdividing in general. The more you subdivide it up, it obviously depends and you got to make sure all the parcels, but the more you subdivide it up, the better in terms of your end ROI because you’re chopping them into smaller blocks. We do a lot of ones where you’re chopping up into five acres, 10 acres, 20 acres.
You can go smaller than that, but you got to make sure there’s things we’re going to talk about. You want to make sure before doing that, and there’s also pros and cons with it. But yet taking a 50 acre property, splitting up five acres in general, Is probably the most desirable piece of land someone could have in terms of the biggest audience because it’s not too expensive.
It’s in a lot of people’s budget. It’s still a good amount of land still in rural America. People will think 5 acres is desirable. So that’s a really good sweet spot. 5 and 10 acres. But if you can chop, take 50 acres, chop it into 10, 5 acre properties, you can buy that thing over 100 percent market value and make.
You know, two, 300 percent return on your investment. I mean, the numbers in subdividing is crazy and it’s crazy compared to how little work it is, I think, cause we’re talking minor subdivides here. We’re not doing these subdivisions. Like Ron said, where we’re buying 50 acres and splitting it up into a thousand.
500 parcels in, in urban areas. That’s not what we’re doing. There’s a ton of money in that. If you guys are going after that, I applaud you because there’s, you’re going to make a ton of money. We’re talking about minor subdivisions. So we’re just chopping it up as simple as possible with the least amount of work to get the most amount of return for that work.
And that’s the fine line. It’s like, how much work are we putting in? How much are we getting back? And that’s kind of what we compare and contrast.
Ron: Yeah, we’re doing this in areas where it’s not normal to have a quarter acre lot, really. Like, we’re doing this in more rural America, two, three counties removed from a main, uh, area where most people own two, three, four, five acres.
And that’s where most houses are put on. So these are very normal size parcels to go resell. So someone can buy it, put a mobile home on it and live happily with that five acre parcel. Um, and that’s the norm out there. You start cutting up these very rural counties in the quarter acre lots. There’s gonna be no buyers out there in a lot of areas around the country.
So you need to be. Very aware when subdividing what the demand on the back end, if I’m subdividing 200 acres into 20, 10 acre parcels, I got to make sure there’s enough demand for 10 acre parcels in that area to be able to resell, because you could be stuck with some land for a long time if there aren’t enough buyers, because that is getting finding 20 buyers in rural America.
Um, but yeah, the money in it, Dan is just like you said, like you can buy things for so much money. If you have a project based thing, that’s just like a builder, maybe overpaying for land in a good area so they can go build because they are doing a project based thing. Like when you’re doing value ads, which subdividing is a value add.
You can make a lot more money on the back end.
Dan: Exactly. And like Ron said, you, yeah, in rural America can get tough because you’re going to have 10, five acre properties where there might not be 10 buyers of five acre properties right then and there. So it might take you eight months to get through it all, which is okay because property one and two.
And three are going to get you in the profit. And then the next few are going to get you anything or going to get you. Yeah. The first couple are going to break even and then the rest after that. So you get rid of that and everything else is profit. And that’s why they’re kind of really cool. But that’s one thing to think of when you’re subdividing is.
Diversity can help. So if you have, you know, maybe a five acre property, maybe a 10, maybe a 20, maybe a few, you got to look at it like that and you can split them up differently. Usually it doesn’t work out like that though. I guess you can make it, but a lot of times it’s just straight chop up five acres, which works really well.
But it can, like Ron said, it can take a while to, to sell for sure. Let’s talk about targeting subdivides. So we’re going to stick for the concept of this show. We’re going to stick with the minor subdivides. So we’re not doing this in urban areas. Like Ron said, Let’s go one, two counties removed from a major or a medium sized city, Atlanta, Georgia, you know, Knoxville, Tennessee, uh, just any, any city in general, it can be Los Angeles, California, it can be New York city.
There’s, believe it or not, for people who aren’t from there, there’s a ton of land in both those areas in New York. And in, you know, Southern California around Los Angeles and San Bernardino County. So let’s talk about how to target these subdivisions, Ron.
Ron: Yeah. Um, so I think the main thing when, when you, when you’re doing a normal subdivide in rural America, you want more road frontage.
Like the, the deal is easier if you have more road frontage, so you can just cut it up along the road. If you don’t have enough road frontage with a subdivide. You might need to put a road in. You might need to put a dirt road in, which is going to be more permits, more complications with the County. And there’s probably going to be a little lengthier approval process when you’re doing something like that.
But ideally when you’re first getting started targeting properties with, I don’t know, a thousand, a couple thousand. frontage, 50, a hundred acres, something like that is very good. And you can be paying, if you know, this has enough road frontage for a subdivide, you can send blind offers to these people offering 65, 75 percent of market value, and then getting in a negotiation process when they call you back and evaluating what you can actually do.
I would not get too much of a sniper approach. I still think it’s a shotgun approach, but try to find parcels, try to mail parcels. that have a lot of road frontage, a couple of thousand feet of road frontage. So you do have room to cut it up, especially when you’re first starting.
Dan: Yeah. And you will run into areas or parcels that are just naturally good for subdividing.
And you didn’t even go after them. You just upped your mail. You’re sending to 200 acres. Now that 150 acre property comes back or that hundred acre property comes back and it’s perfect for a subdivide. You were running into deals like that all the time. There’s other ways you can hand select deals. We don’t do that.
We, like Ron said, we’re doing more of this, the, the shotgun approach where. If we send out blind offers, we get called back. It’s perfect for subdividing. We see that we’ll be a little more flexible in the negotiation potentially, or, or we’ll just get it and be like, this is a perfect subdivide and do it.
We have not targeted counties for just subdivides yet. At this point, there are ways to do that. I’m sure, but we have not done that. We’re just getting them naturally through sending out higher acreages. With a lot of road frontage that happens naturally from just sending out two to 200 acres. Like that’s how big of a shotgun approach we’re doing.
That being said, going forward, we don’t want all these small deals with our business. So maybe we’ll do, you know, 20 to 500 acres or 20 to 2000 acres or 50, you know, and really narrowing it down. Cause we’re trying to do bigger and bigger properties right now, but we’re not really targeting them. They come naturally.
And we’re doing a lot of subdivides right now. Sure. There’s better ways to target if you just want those, but you will get these from the subdivide. It’s it’s, the question is when you get these calls back, And when you get these properties, are you looking at it? Like you got to change your mindset. You got to look at it like it could be a potential subdivide and don’t force it.
We’ll get into some of those as well. But Ron, I want to talk about why subdivides can fail and what we have seen from that aspect. Like what can go wrong here?
Ron: I think not knowing the county’s restrictions for sure. Like if you just expect like, okay, I can do this, this, this, I’m going to buy this and then I’ll do this.
And then like you go to do it. You talk to a surveyor after you buy it and they’re like. You’re going to need to go through an approval process and there’s a chance you don’t get this approved. Like there are regulations in most counties behind what you can do. It’s not like you can just do anything, subdivide any land.
Some counties you need, you cannot subdivide less than a certain acreage. Some counties, you need a certain amount of road frontage on every parcel. Some count, there’s just a lot of different some counties. You need to make sure there’s public utilities when you’re subdividing on all of them. So if you go in and you just get a, get a deal back or something like that, and you go through and buy it and you just plan on subdividing like, okay, this is the plan.
I can sell these 10 acres for X dollars. I’m gonna make 200, 000, whatever it is. And then you do not check on those regulations. And actually make sure what needs to be done right now. We’re talking to an engineer, a fire, cause we’re, we’re looking at putting in a three, 4, 000 foot road. Like we are talking to all different types of people during our due diligence period with his seller, cause it’s a half a million dollar purchase.
And we’re doing all this stuff obviously before we buy, cause the deal doesn’t make sense if we can’t get a quick approval from the County. So I think that is the number one thing where you can. Not only like not make as much money, you can really screw yourself over. If you do not look at that correctly.
Dan: Exactly. But luckily in this case, if we were to buy that, we could still make a couple hundred thousand dollars off of it if we were to flip it. But the numbers don’t, if we were just going to flip it, we wouldn’t buy it. We went up in value and went up in price because we know we’re putting improvements on it.
So worst case scenario for this one. We’d buy it for what you said, a half million, sell it for like 700 or something like that. And we’d still make money, still make money off of it. But yeah, you want to do all your due diligence before also you don’t want to force it. Some people will chop them up and some of the parcels get horrible land and you’re going to be stuck with those.
You don’t want to force subdivides. That’s a really another big one that I see. Um, really putting, putting too much work into making it happen when the numbers don’t make sense, like cutting it in half, sometimes cutting a property. 10 acres into two fives or 20 acres into two tens or something like that.
Doesn’t always make sense financially. You might get 10 more grand out of it, but then it takes you four months to self longer, whatever it is. You got to look at how are you going to sell it? How much more money it’s going to make, how much more time it is, what’s the survey cost and what the process and time is compared to the return that you’re getting.
Ron: For sure. If you, I, I like your point, Dan, and what Dan’s saying about the quality of land. Like if you’re subdividing in, you don’t have enough road frontage and you’re making these weird shapes, always think about before you subdivide the end buyer and what, what do you think? Buyers are going to tell you when you subdivide like this, like that shape doesn’t make sense.
Like if you think that’s what they’re going to say, do not subdivide it like that. Change up your shapes, try to figure it out or just don’t subdivide and buy the land at the right price where you can flip it as is. That is a huge thing that you see with. People on their first subdivide and it’s a learning mistake that they, they, a lot of times we’ll tell them like, that’s probably not ideal.
Your, your end buyers aren’t going to like that parcel. Sometimes they go through and do it and it’s a learning lesson on the back end, but that’s a really good point, Dan.
Dan: Exactly. And those are the main reasons. You know what? I’m trying to think if there’s anything else that comes to mind why subdivides fail because people really are going to want to hear that part.
Ron: I think Dan, uh, sorry. Um, don’t, if you’re subdividing like, like we talked about 200 acres, 20, 10 acre parcels, you cannot expect all of those 10 acre parcels to sell at market value. They will not unless the demand is absolutely crazy. Like you are going to have to. Fire sale some of your parcels if they’re all the same acreage.
I like if you have 200 acres or subdividing it, have a bunch of different size parcels so you have different buyer types. You’re splitting them all to 10 acres. You might not like, it’s, it’s going to be more difficult to find 20 buyers for that. So think about that. And some of these, like you need to fire sale some of them, in my opinion.
I don’t know. What are your thoughts on that, Dan?
Dan: I agree. And a lot of times it doesn’t, it doesn’t matter as much because you’re not trying to squeeze, like when we’re trying to double our money, you’re trying to squeeze every ounce out of it because the margins are a little tighter. I mean, we’re talking, you’re still buying for 50, selling for a hundred, but, Uh, the, the returns are just so good on these subdivides that.
Getting rid of something quick for a good price and a good offer isn’t always the worst case if you do this right on the front end. But there are some pros and cons that we’ve been talking about here that I want to point out, Ron. I mean, the main, the main pro in subdividing land in general. Is you’re getting a better return, period.
You’re making more money on the end, you’re putting value into it to get a return on what you’re putting in. On the effort and improvements that you’re putting in. You’re splitting up the land. You know, same concept guys, if it’s going to Costco, buying a thousand hot dogs, first going to your local grocery store and buying a pack of five.
You’re gonna get a better deal on bulk buying and that’s how it works. It’s the same exact philosophy, then you sell them off one by one. Then you take those thousand hot dogs. Take them to a reds game, a baseball game, and you sell them off one by one for four bucks each when you bought them for 50 cents and you make better margin that way.
Just like wholesaling, uh, like wholesaling and distribution in general. I’m not talking real estate wholesaling. That’s the same concept as wholesaling. You’re buying pallets and crates from China, bringing them in, storing them and selling them to local, local places one by one or the end consumer one by one.
So that’s, it’s the same concept as that. Don’t overthink it. And that’s how you want to make it make sense. But the pros in general, more money cons. Longer process, subdividing takes the survey, uh, a little bit more on your operations, like Ron said, sometimes you’re not going to be able to sell every single one right away, which is okay.
And then other cons, I guess, I think overall it’s less risk, honestly, for, I think that would be a pro less risk in general, cause you’re splitting it up into more acreages and splitting it up, Ron.
Ron: Yeah. I think having a good survey contact, like surveyors are kind of like contractors sometimes where. Uh, they tell you they’re going to get it done in two weeks and it’s four weeks and they’re still not getting it done.
Like you need to stay on top of your surveyors so you can make the deals happen and move things quickly. But learning through the process, like it is a learning experience that we might be making it sound easier. Like there are some counties where subdividing is extremely easy and the counties. Make it easy because they want more parcels.
They want more mobile homes on land. So someone taking 50 acres and splitting it up is a value to them because then you’re going to have 10 separate people putting mobile homes. They’re going to make more money in taxes when these people throw houses on their their counties growing. Everything’s growing.
There’s a big incentive for these rural counties. Um, But yeah, there it’s, it’s a learning process. Like you guys, it’s, you’re going to make mistakes through these, but it’s such a profitable thing. Like usually the mistakes you make, aren’t going to cost you, it might cost you a little bit of money, but you’re still going to make money on the deals always to end pretty much.
Dan: Yeah, exactly. I don’t have too much to add. The only thing I want to put is you guys just need to think bigger. Even if you guys are just getting into it, don’t start with these, learn how to buy and sell land couple of times, do it three to five times. Just flipping the basic model that we have, cause you’re going to make good money doing it and you can quit your job doing it.
So I don’t want you guys to think you got to add improvements to make this work. Like the majority of our properties, we’re still just buying and flipping right away. Cause we got a killer deal on them, but that being said,
Ron: Oh, go ahead. no, I was going to say, like Dan said, just in the mind of thinking bigger, send a bigger acreages.
Daniel said that he kind of not, he brushed over a little bit earlier. It’s really important. We have so many people and I see the. Mail coming through two to two to 10 acres, five to 12 acres, like that’s the acres are mailing. Just go up to 200 acres. Just go up. Yeah, like it. It’s not a ton of mail, it’s not a ton of costs.
And the high end is you are going to have a deal that makes you three, four, or $500,000.
Dan: And once you realize, that was my thing here. My whole point is once you realize it’s doable to get these bigger deals into subdivide, you’re going to keep thinking bigger and bigger. You got your $10,000 deal done.
Maybe your first one was a hundred thousand, who knows? But then once you realize you could do a fifty thousand and then you do a two hundred thousand then you do a seven Hundred and you realize the process is really the same no matter what you do. So why not just keep going bigger? You guys got to think bigger because the money’s at the top right there You just need so many less deals and you’re making five hundred thousand off of each deal or two hundred thousand Versus and I’m not dogging buying for twenty selling for forty five.
That’s still the bread and butter. You’ll make great money doing it You’ll quit your job doing it. I’d highly recommend it But think bigger. Just keep upping yourself. Get that next bigger deal. If you guys haven’t had a six figure deal yet, next mailer mailer, you send out attack six figure deals, maybe only just go after big properties and put that only in front of you.
So once you get one, then you know you can do six figures. The beginning of this year at Apkee land, our company, one of our quarterly rocks or annual rocks. I don’t, I can’t remember the term for it, but one of our goals for the year was getting more six figure deals up to that point. We had very few six figure deals in terms of acquiring for six figures.
That’s acquisition price. And ever since we put that in front, we got it. We got a bunch of them. We started getting one or two, started getting more of them. And now we just have so many big deals. It’s, Majority over 100, 000 almost. It’s just, it keeps going up and up and up and up. And now we have our bigger, biggest deals ever coming.
So you just want to keep upping yourself, keep improving yourself, keep going after bigger deals. Cause it’s the same process, same work, more money, more profit. I mean, you’re talking generational wealth. It’s really amazing what this can do.
Ron: Yeah, for sure. Uh, it’s, it’s a mindset shift guys. Like it really is, there is money in the community to fund your deals.
If you find a three, 400, 000 deal. That makes sense. And the margins are there and those deals, if you’re a good salesperson, Dan, if you can build some relationships, those people who own that land are not talking to a lot of people. It’s you and only you. So if you can build a relationship with them, build trust with them, assure them that you have the cash ready, build a funding partner.
Like those deals aren’t that difficult. It’s just not making 400, on land deal is not that difficult.
Dan: I completely agree, but you got to get that mindset ready to be able to attack them and actually believe it. Cause that’s when they’ll come. As always, thank you for joining. Please do us a huge favor and like and subscribe our YouTube channel and share this with a friend.
It really means the world to Ron and I. But more importantly, it could help change the life of someone else. Thanks for joining and we’ll see you next episode.