Subdividing land can be a powerful strategy to boost land profitability, but is it right for every land business? Hosts Steven Jack Butala and Jill DeWit dive into the pros and cons of turning larger properties into smaller, profitable parcels. They explore what it takes to make land subdivision a viable part of your business model, the common challenges land investors face, and practical tips for success. Whether you’re new to land investing or looking to scale up, Steve and Jill’s insights will help you navigate the landscape of land profitability through smart subdivision decisions.

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Unlocking Land Profits: Is Subdivision The Right Move For Your Land Business?

Introduction

This is episode number 2065. We’ll talk about subdividing land as part of your already profitable land business. Can you subdivide a property? Can you buy 48 acres and subdivide it into 40 1-acre properties? Can you take that 40-acre property and make it two 20-acre properties? What’s the deal? Is it profitable? Do I want to do that? That’s what we’re going to talk about.

Thank you. I feel bad. This is like Jack’s week. I’m over here like, “I don’t know why I am over here.”

All week this week, we’re talking about what works and what doesn’t in your land business after 30-plus years of doing this. We’ve had successes and failures. That’s what we are talking about this week. Yesterday, we talked about tax deeds and tax liens. Today, we’re talking about subdividing land, and whether or not you should do it. Wednesday, should you add more homes or houses if you’re in a flipping operation or land flipping operation?

Thursday, we review the five types of land. Which ones are best to invest in and where to do it in the country? Friday, we’re going to talk about having a real candid truth about why Jill and I are still here after 30 years, and why we are still putting money on the table in this land shenanigans. Each day on the show, we answer a question from our Land Academy member Discord forum. We take a deep dive into land-related, topics by popular request. I say shenanigans because of this.

When I start this, everybody is going to nod their head out there who has experienced this. I said, “Yeah. We’re buying properties at auctions and reselling them on the internet.” Every single person who was over 30 at the time said, “That’s the dumbest thing I’ve ever heard. Who the hell would ever buy a piece of property sight unseen?” Probably a hundred people said that to me. This was in the ‘80s, and then the same thing happened when the internet kicked in, and you could sell a car and buy a car online.

We're buying properties at auctions and reselling them on the internet. Every single person over 30 said, 'That's the dumbest thing I've ever heard.' Now, here we are. Share on X

Who would ever buy a car online? I was one of those people. Now, everybody does. Before that, it was like, “Why would somebody input their credit card numbers into the internet? It goes out into space. No one would ever buy anything on the internet with their credit card number.” Here we are. What are we saying now?

Can you keep going like, “Who would put a phone in their car?” How is that even possible? You can’t have a phone in your car.”

How much would it be? What’s next?

Microwave. I remember the microwave like, “You’re going to die. You can’t stand close to it. It’s going to cause cancer and everything you eat. You’re going to die.”

You’re not going to have children.

If you put that bagel on the internet, I guess you’re never going to have children. That was a thing for a long time. I don’t care about the past. What do you think is going to happen ten years from now when people look back and say, “You what?”

You’re writing your own paper for school?

They say that now. I hope they say, “There are gas stations?”

You’re driving your own car? That can be a thing. It’s funny. Here in the state we’re in right now, that’s a very big deal because the northern part of the country, as you know, gets cold. Guess what doesn’t work well? Some of these flipping electric batteries. In some states in the north right now, as we’re recording this, it’s election day. I have to share with you my sweet flag sweater. It’s election day.

It only took one episode of recording before we talked about Jill’s outfit.

I know, right? It’s a hot topic around here because there are politicians who are so strongly pushing electric cars. They’re like, “I need my pickup truck and it has to be gas-powered or it won’t start when it’s negative 10.”

These are real estate people. There’s a lot of driving. Charge times are an issue and all that. I was driving an Urban vehicle. I get it.

The Pros And Cons Of HOA Properties

I’m trying to get ahead of what’s next. That’s one of the hot topics, but we’ll get there. Let’s go into the question. Marilyn wrote. “I’m looking at purchasing two lots and each of the lots has a 129 interest and a community building on it. It’s in a community lot that allows access to a lake that has a community building on it. Got it. I don’t see any legal descriptions of parcels located around the lakes described this way. Should that be a concern?” Two lots. Okay. They have 129 interest in this extra little thing. I believe you’re right. You’re going to pay for it. That’s true.

This is how HOAs work, not just with land but with condominiums and detached condos and all of that. They’re getting a tremendous amount of popularity and here’s why. HOAs are structured like this. A developer comes in and subdivides some property to create any type of condominium. It could be a high rise, a garden condo, detached, and all that. It could be structured like it’s a corporation. You own as a buyer of one of these units. They are your own airspace.

The common property is all owned by that LLC or the HOA and you pay that LLC every month to handle all your stuff. Sometimes it’s electricity or whatever is involved in that HOA. It can be a great thing. When you do all the math, HOAs can be great. If you’re a busy professional and you have no interest in ever owning a lawn mower, which I understand, HOAs can be great always can be great. That’s the LLC type of HOA. What Marilyn is talking about here is a common interest HOA that was designed to do away with that corporate oversight.

There are 29 lots in the community. I own 1/29th of the actual community. You start to have a little bit more ownership and a little bit more say whether or not you can leave your trash out or all those types of topics that HOAs are famous for. The third type is a co-op where there are 4, 5, or 10 people. The charter says, “As a person who lives in that co-op, I get to judge and vote on whether or not I want when somebody goes to sell their interest.

Who is going to live there?

That’s so antiquated and silly, but we still see them. New York City has a lot of co-ops.

I see that. If you ever watched the show, Frasier. He lived in a co-op. That was the thing. The board did meet and they’d have to approve who’s moving in the building.

Marilyn’s in here is the second kind. It’s common interests. As a land investor, my first reaction to this is to run away fast. What bothers me is not the social implications of it. What bothers me is that now I’m signing up to pay a tax bill every year, which in every piece of case you’re going to pay, but now I have another bill. Whether I use the property or something goes wrong and I don’t sell it on time. There are other responsibilities. You have to cut your lawn. In a lot of cases with LOAs or Land Owner Associations, you have to manage and maintain a lot. It’s not like buying 48 acres in Wyoming and it’s out there and there are no rules. I wouldn’t buy this, would you?

Should that be a concern? You know what it is? You seem to get your hands on the documents. We’ve been talking about this. Some HOAs, LOAs, and POAs are okay. I’m spending the equivalent of $20 a month to get our streets plowed because the county will go up to our property, but back in here, they don’t cover that. I might be paying into a group fund to get that done. I’m totally okay with that. My thing is just get your hands on the documents and then you decide. That might be over the line, or you might go, “That all that includes? Okay, great. That’s fine.” It’s $10 a month for fill-in-the-blank because we have a picnic table and this kind of thing. That’s what I have to say.

Why HOAs May Not Be Ideal For New Investors

If you’re new, don’t get involved in this.

If you’re free of it, don’t do it. That’s true.

If you’ve done a few deals, look at it as a very serious negative. This is 99% of the time. If you are a long-term investor like us, as Jill just said, read this stuff and consider it. There’s a ton of money in HOA communities in the past. It’s a lot harder now than it used to be. There are better deals out there.

Today’s topic is subdividing land profitable as part of your land business. We have subdivided and do subdivide properties regularly. Like everything, there’s a right way and a wrong way to do it. Here are the two ways to subdivide a property. Number one, chances are you live in a subdivision. It’s called a subdivision because somebody subdivided the property.

In the question yesterday, we talked about how everything starts out with 1 square mile, which is equal to 648 acres. If you can envision somebody buying 648 acres and sitting down with a civil engineer or an urban planner and drawing roads, “This is where the parks going to go. This is where the row house is going to go, and the townhouse is over here. This is where you get on the train to go to the train station,” and that’s all very lovely. It is a beautiful dream, an unrealistic dream to sit down and do that. That happens. Those are master plan communities. That’s called entitlements in general.

In the western part of the state, it’s called entitlements. In the eastern part, it’s called subdividing. For you as a land investor, and I include Jill and me in this, to go out and do that is extremely unrealistic. The people who subdivide property usually buy big swathes of property from farmers and relatively urban areas, Phoenix is a great example, if you go on Google Earth or Google Maps, there’s farmland interspersed in between subdivisions.

It’s only a matter of time before the farmer says, “I can’t say no to this amazing price for my property. $33,000 a month earnings per year, I think I’d rather have $68 million.” Big companies like Shea Homes and Toll Brothers, usually publicly traded companies have armies of lawyers and engineers that master plan these things so they can develop them. You probably live in one, Jill. We’ve lived in them together and separately, Jill and I have over the years.

Not at the same time. You’re over there and I’m over here.

That’s a different story. We should tell that story someday. Can you do it? Buy a big 40-acre property and subdivide it and do all that or even just cut it into 41-acre properties? Hell, no. The chances of you doing that are very slim. Every time I go on social media and I see somebody trying to teach this or instruct that, it makes me mad. It’s just not realistic.

They think it’s so easy in 90 days. Hold on a moment.

The second and final way to subdivide property is called a minor land split. It was designed for people, usually farmers or rural landowners, to take 5 or 10 properties at 5 or 10 acres, or some number like that, and rewrite the legal description. Without getting an incredible amount of detail, part of a subdivision has a legal description. The northeast quarter or the southeast quarter of section 16, range 32 East, or something like that. I’m not going to get into that right now, although I have gotten into it in other venues.

You can very easily, if you understand those descriptions or if you’re an engineer, rewrite that description and then take a square five-acre property and make it 2 or 2.5-acre properties. That’s called a minor split. Some municipalities encourage this. They don’t have to do any work. They just have to approve it. Usually, they require a survey. Usually, organized rural counties have a section of their accounting that encourages this and wants this. Some of them require septic tank approval before they do it. Every county is different.

Is the key what the county has deemed what we will allow here and what we will allow there? How would I go at this and know which is possible?

Learning To Work With County Regulations

You aren’t going to tell a county to do anything. Never in any circumstance. They’re going to tell you what to do. If you say, “It makes sense for me to buy 40-acre properties and XYZ county, I’m going to call them and see if that’s feasible.” Ten times out of ten, they’re going to say, “You’re out of your mind. However, If you buy 20 acres over here and you want two 5-acre properties, and you’ve applied for this, do this and these three things, we’ll happily do it. You have to do it our way.”

That’s a sad reality. I think people buy property assuming it and not checking this first. That’s a biggie. That’s a really big thing. When you’re doing your due diligence and picking a county, you need to call them and have a conversation and find out what’s even possible. You know what you’re trying to do versus just buying and reselling. That’s one thing. If you’re going to do something else, you want to get to know if they are responsive.

If you’re going to do something more with land, call the county and find out what’s possible. That’s a big part of your due diligence. Share on X

The topic’s title today is “Is subdividing land profitable as part of your land business?” Yes, it is but know this. You will never do a subdivision in your lifetime unless you start down the path of doing subdivisions and that’s what you spend your life on for Shea Homes. You can minor split a property very effectively, but you have to do it the way the county wants you to do it.

Am I wrong in this? I see it like this. I see subdivisions as I got to put in streets. I got put in some infrastructure. I got to do all these little things. Is that normally part of the process? What percentage of the time is that required?

I’ve never seen a subdivision where they didn’t require that. I mean a massive subdivision. When anyone says subdivision, it’s the Shea Home’s way. It’s the entitlement way. When you say minor split, it’s the way that we do it. We asked the municipality how they wanted it, what was most conducive for them, and the easiest to jam through their political red tape system.

How small can I go? How many can I put there?

This is the kicker. You have to make it your responsibility. The county doesn’t care if you make money or not. The kicker is you need to find a place where properties are cheap enough that you can split. Now you’re turning one APN into let’s say 5 or 4, and then are those 4 or 5 APNs as a whole way more valuable than what you paid? That’s the only situation where Jill and I would ever do that. We do it often. We always have one of those going on. At least one.

Do you know what’s interesting that I think people miss? You and I talked about this a lot. It is that we don’t go into buying a property overspending because we know we can do this and it’ll work out okay in the end. That’s an important piece. You need to go into this knowing that this is an option if I want to do it. The way I’m buying this right now is today, I’m going to make money tomorrow, and then I can decide how I want to go.

This is not my favorite way to make money online. My favorite way to make money online is to send a bunch of mail out, have some properties come back, and have some deals come back. Jill sifts through them. She picks 5 that she thinks are going to work and then together, we picked the 2 or 3 that we can just reset for more immediately. That’s the Land Academy way. There are certain cases where maybe you make $50,000 to $100,000 a deal.

Subdividing isn’t my favorite way to make money. My favorite way is to send out mail, get deals back, and resell some immediately. Share on X

There are certain cases where I can make half a million dollars on this deal. Now, I’m going to be a little more patient. I’m going to say, “Hold on. I’m going to get an engineer in here. We’re going to subdivide or split this property. I know that if properties are 1.5 acres or larger and I’m only taking one APN and making it less than six, meaning five, I can resell these properties. I will get septic approval because other people have done it in this area.

My point is this. This is the whole thing this week. Should I add this to my already existing land business? The answer is yes in all cases. However, it’s complicated. You need to make a time and money commitment to learn this stuff correctly, and and it has to be in your blood.

When To Consider Subdividing In Your Career

When in your career would you recommend this to someone?

Not in the beginning,

Maybe after how much time or how many deals?

What I would do is recommend that you find some other people doing it, whether they’re in Land Academy or not. Learn how to give them what they want. What they want is cheap land, cheaper than they can go buy because they don’t know how to send out mail. Only you do because you’re part of Land Academy, but they know how to split it and they know where the value is. Get together with somebody who becomes your buyer or your business partner and feed them some amazingly inexpensive but valuable properties that fit the profile they want. This stuff is complicated and time-consuming. There’s a huge long list, the older I get, of things I have no patience for any longer.

For some reason, we both have a lot of patience for land transactions. We have a lot of patience for instructing or teaching Land Academy, and all things land and real estate. It’s in our blood. I don’t have a lot of patience for a long line at a grocery store or real estate agents or opening up a brokerage account. Opening a brokerage account online takes two weeks to do that because they have to verify everything. From a bank that I’ve deposited more than $40 million over the last 25 years. It still takes two weeks to do that.

That’s another show, another week, another day.

Closing Thoughts And Future Topics

It’s Wednesday tomorrow. Please join us. We’re going to talk about adding mobile homes or houses to your business and help you make more money. You are not alone in your real estate ambition. We are Jack and Jill, information and inspiration to buy undervalued property.