When the county requires paving at lot six, the 14 lot version of an 80 acre split stops working

Question

Here is a phasing problem worth working through. Take 80 acres under contract at $280,000, so $3,500 an acre. Zoning is a 5 acre minimum. After a road corridor and one unbuildable low area the yield is 14 lots. Comps on finished 5 acre lots in that township run $42,000 to $48,000, call it $45,000, so $630,000 gross. The problem is the subdivision ordinance. Six or more lots is a major subdivision and triggers a road built to county standard with a paved surface. A civil engineer sketching roughly 3,000 feet of centerline would put paved-to-standard at $170 to $200 a foot all in with drainage, so $510,000 to $600,000. That erases everything. Gravel to a private road standard comes in nearer $55 a foot. So the operator in that position is looking at doing 5 lots now on the gravel spur and coming back for the rest later, or selling 40 acres whole and splitting the other 40. Before spending more on engineering, what is the phased approach missing?

Rena Expert · Accepted Answer

The phasing plan is the first thing a planner will look at, and most subdivision ordinances have language written specifically to stop it. Look for a section on successive or serial divisions, sometimes titled circumvention, that counts divisions of the parent tract cumulatively regardless of timing or intervening ownership. Where that language exists, lots 6 through 14 pull the whole tract into major review and the paving condition applies retroactively to the road serving lots 1 through 5. Some counties instead require any minor subdivision to include a note on the plat reserving future right of way to county standard, which achieves the same thing more gently. That single ordinance section decides whether your plan exists, so read it before you pay for another drawing.

Your $45,000 comp is doing more work than the road number. Those comps almost certainly sit on existing public roads. Lots on a private gravel road with a maintenance agreement typically trade at a discount, and the reason is financing. Plenty of lenders won't write a construction or lot loan without a recorded maintenance agreement and sometimes a paved or all-weather access finding, which thins your buyer pool to cash and local banks. If the private road version of your lot is a $37,000 lot rather than a $45,000 lot, 14 lots at gravel is $518,000, and the gravel road at $55 a foot is $165,000. That's a different deal than the one in your post, and it's still probably a better one than paving.

Two other costs I'd force into the model now. County improvement guarantees, meaning a bond or letter of credit for the road until final acceptance, tie up real money for a year or more. And 14 soil tests at rural county rates plus reserve areas will find at least one lot that doesn't perc, which is how a 14 lot plan becomes a 12 lot plan after you've already paid for the road serving all 14.

ehernandez74 · Answer

The line worth adding to your spreadsheet is property tax after the plat records. In many jurisdictions an 80 acre tract under an agricultural or forest assessment gets pulled off that classification the moment it is platted into residential lots, and some states charge back several years of the difference at the same time. So the carrying cost per year jumps and there is a one-time bill on top. On a 14 lot absorption that could take four or five years to clear, that is well beyond a rounding error. Worth asking the assessor directly, since the rollback rules are state specific.

When the county requires paving at lot six, the 14 lot version of an 80 acre split stops working

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