Chapter #5: The Subdividing Play

Play 5. The subdividing play. By land, they're not making any more of it. Mark Twain. To open this chapter, I want to challenge a piece of conventional wisdom. This particular item is a catchy little statement that you've undoubtedly heard. Perhaps you've even repeated it yourself. And why not? For first glance, it seems undeniably true. The statement or more accurately, the cliche, I'm referring to as the one I just mentioned above. If you really think about it, how true is this statement reality? I'm going to let you in on a little known secret. Lean in for this one and take note, or this is only known by developers and top land investors. The masses are utterly blind to it, which probably explains why they repeat and perpetuate that one liner about not making any more land. The secret I'm about to reveal to you is one that I and other top land investors all know very well. The secret is that land investors, whether that's you, me, or any others, can make more land. We do it through a land investing play called subdividing. Subdividing land. What subdividing? The term means dividing a single parent parcel, tract of land into more parts, known as children or child parcels. Subdividing is typically done on either a major or a minor level. At the major level, you'll find land investors and developers devoting as many as 15 to 18 months to a subdividing project. The project will involve the division of land, along with the addition of such things as sidewalks, utilities, jogging trails, and other infrastructure. All of that puts the major into major subdividing. Major subdividing won't be covered in this book, as it's way beyond the scope of what I teach or currently do in my own business at this time. Our focus will instead be on minor subdividing. Minor subdivides, also called minor land divisions, are smaller projects than involve breaking land up into five or fewer pieces. The advantages of minor subdivides is that they are typically faster, cheaper, and require little to no improvements. I.e. adding infrastructure, utilities, etc. Minor subdivides, if they meet some exception criteria, can also usually be recorded administratively without a public hearing. If the jurisdiction is at the county level, there is no national standard in zoning regulations and requirements change from one area to the next. So I'll be speaking in some general terms here that may or may not apply to your local market. I often refer to this play as not just play number five of the subdividing play, but also as minor land divisions, major profits. Because with a minor subdivided, you can often see 100% and up to 200% forced appreciation from the value added through subdividing the land. Before we look at how to force appreciation along those lines of 100% to 200%, it's worth rewinding a bit. That's rewinding in the sense of taking a step back to ensure you're clear on parent and child parcels. I threw those terms out on the assumption that these were obvious, yet they may not be. So here's how the two terms specifically relate to one another. The original parcel you're dealing with in a subdivided project is the parent. When you take the parent and subdivided, the smaller parcels become the children. For our purposes in this playbook and for the minor land division subdivided, we'll limit our discussion of splitting the parent parcel up into five or fewer child parcels. Another thing to address in explaining subdividing is roadfrontage. Roadfrontage is tremendously important when subdividing because it gives you options on what you can do as a subdivider. Suppose for example that you have two property boundaries with roadfrontage. The roadfrontage provides you with more possibilities and can potentially allow you to subdivide land in a more child parcels. Keep in mind here that jurisdictions will often have a minimum footage requirement for the front boundary of the child parcel. That matters because it means for instance that you may be required to have 150 feet of property line fronting the road at a minimum. In this case, even if you had an incredibly long skinny parcel that was 40 acres in size, but only 300 feet of roadfrontage, you might only be able to subdivid it into two parcels because you would need to meet the minimum roadfrontage requirement. The takeaway from all this talk of roadfrontage is that anytime we have roadfrontage on two boundaries or more, we'll have more options and that usually results in a higher number of child parcels. Moreover, we'll also have options on how to size these child parcels rather than being tied to the roadfrontage requirements and their dictates. Still, why do we care about having options and being able to subdivide parcels in the first place? If you're reading the preceding chapters in this book, you'll know I'm constantly asking the question why. Whether it's this chapter's land investing play subdividing or any of the others, I want to be clear personally for me and for you as a reader on the underlying purposes. Following this interest or perhaps obsession with having a clearly articulated why, let's address it for subdividing. Why do we want to run the subdividing play? The answer involves pizza. Consider pizza and you'll find it to be a fitting answer on why to run the subdividing play. Seriously, pizza answers the why question because of the fact that it is with land, pizza can also be subdivided. Now personally I think slice sounds better than parcel. Slices also has a nicer ring to it than subdivision. Imagine calling abdominose or pizza had to order a few parcels or subdivisions of a pizza. All the same from a high level standpoint. It's not crazy to think of slices of pizza as conceptually comparable to the parcels and subdivisions created when splitting land. For pizza doesn't begin in pieces. The pieces you'll find in a box are created by cutting up a single larger pizza pie. The pizza pie is essentially the parent and the slices are its children. But why not just keep the pizza as a single pie? And asking this question we return, albeit from a different angle, to the question of why subdivide? Look at the question now through the lens of pizza. A restaurant that offers pizza by the slice can make more money selling individual slices than entire pizzas. For example, selling the entire pizza as a single unit might only result in the earnings of $12 for the whole pizza. By contrast, if an entire pizza were cut up into 8 slices, each of the slices might then be sold for $3 each. Selling the 8 slices at $3 each would mean $24 for the restaurant. Given the relatively small dollar amounts in this example, the difference in earnings between selling slices and selling a single pizza to approximately $12 is significant. In fact, it represents 100% increase in profits by selling slices versus selling the pizza whole. And what made the difference? Cutting. Yes, the simple act of taking a pizza wheel and using it to cut slices of pizza. That's all. Other than this difference, it's the exact same pizza in both instances. So what about LAN? Could you increase your earnings on a LAN deal by slicing up a single piece of LAN? Yes. And this is exactly why we care about subdividing. Subdividing allows you to break out of the confines of just having a single fixed piece of LAN. You don't have to accept a parcel as it is. Instead, you can figuratively rewrite the rules about what's possible with the said parcel. As an illustration, suppose you acquire a 20 acre parcel. In the market where the properties located comparable properties have sold for, say, $100,000. Imagine though that you're able to subdivide this parcel into four slices of five acres each. Each of those slices or more accurately child parcels might then be sold for amounts ranging from 50 to 60,000 each. Sell all four of the five acre lots. and you're looking at earnings of 200,000 to 240,000. Do you see the point now in subdividing? If not, then let me offer one more reason in favor of it. Moving away from pizza, here's a pragmatic even blunt reason to subdivid. The reason is that subdividing lets you hack a seemingly tough market. By tough market, I'm referring to those sellers markets where there's little inventory and sellers demand high prices. And after paying those high prices, you're not just capturing enough equity to escape the respectable margin, let alone the ROI of 100% or more. One way to beat this scenario, or at least mitigate it, is through subdividing. By subdividing, you can turn a single acquisition and to perhaps four or five different parcels for selling. I.e. disposition. This means each victory you achieve in your uphill battle against the tough market is amplified four to five times. How's that for efficiency in doing more with less? To summarize then, subdividing can be the answer in sellers markets, allowing you to either one, maintain your current volume of acquisitions and transactions, and four to five times the number of dispositions, aka sales that you're able to do, or two, maintain your current annual revenue and slash the number of acquisitions by 75 or 80%. Why isn't subdividing more popular? Having now examined the reasons and favor of subdividing, you may be wondering why this strategy isn't more popular among land investors. Naturally, I can't speak for everyone in the land investing space. All I have are my own experiences of land investor, coupled with my observations from coaching countless other land investors over the years. Drawing on these experiences and observations, I would say subdividing is a strategy, lacks widespread awareness, and adoption for three basic reasons. Chief among those reasons is the fear factor. Subdividing isn't a simple flip, like the standard land investing play most educators teach. To the contrary, subdividing requires you to put in some work after acquiring a property before you then flip it. Seeing this, the casual land flipper can regard subdividing as a daunting project, an insurmountable wall to climb. This view can then have the unfortunate effect of prompting fear-stricken land investors to retreat to their comfort zones, stick into the standard buying flip. Hopefully this chapter will allow you to learn from their mistake and in contrast embrace subdividing, thereby reaping the rewards that accompany it. Two more reasons that subdividing seem to have gone unnoticed by most land investors are confusion over terms and a lack of capital. On confusion over terms, you'll find that many people, including some land flippers, have an incorrect picture of what subdividing entails. To them, subdividing invokes images of utilities, water, power, sewer, jogging trails, a subdivision, or even gated communities. The mistake here is to equate subdividing as exclusively involving major subdivisions and the work of a real estate developer. That's certainly one way of subdividing as we mentioned earlier with the major subdividing. Get it's not the only way. You can also engage in minor subdividing, which again is what I teach and is the basis of this chapter's play. Grasp the distinction between major and minor subdividing and you'll see why those who are uninformed on subdividing often avoid it. They see only major subdividing and are deterred by what appears to be a monumental undertaking. Not that the subdividing I'll be teaching you here doesn't require work, it does. But the workload is nowhere near that of a developer. Then there's a lack of capital. This was another one of the reasons I believe the subdividing play as yet to catch on with most land investors. Following on the heels of the previous point, confusion over terms, people often equate subdividing with projects to build ginormous subdivisions. Such projects require cash and usually lots of it. Cash, however, is just the thing that the average land investor may be short on or else unwilling to commit to a large scale project like building a subdivision. Accordingly, land investors may come to the false conclusion that subdividing is financially off limits to them. If only they could see the full picture of subdividing. That picture includes minor land divisions and those tend to be very inexpensive relative to the amount of appreciation that can be forced. Just how inexpensive are we talking? Well as an example, let me share a case study of an actual student of mine who's in my land boss mastermind. Turn your attention next to Johnny. He offers a case study of what subdividing looks like in the real world. As a member of my land boss mastermind, Johnny learns this subdividing play from me. That specific strategy was called minor land divisions, major profits, and Johnny was paying attention. He then ran the play on a deal involving a 14 acre property. The property's market value was $108,000. That's how much it was worth as a single 14 acre pizza pie to reiterate that earlier analogy. In addition, the purchase price of this property was $50,000, which was an amount equal to 46% of its market value of $108,000. Johnny recognized however that this pizza pie could be sliced up into different size lots. He saw it as specifically becoming a five acre lot, a four acre lot, a two and a half acre lot, and two, one and a quarter acre lots. Subdividing along these terms was possible since the property and its 14 acre form had road access on two sides. Wondering how Johnny arrived at a sense of parcel sizes? It was the result of consulting a local real estate agent who specializes in land. With the agent's guidance, Johnny gained valuable boots on the ground knowledge of what parcel sizes were ideal. Both for his property and for the surrounding market overall. From there, Johnny proceeded with subdividing. He did so by relying on a land use consultant. That consultant interacted with local government authorities, saving Johnny from having to personally make any trips to city hall or wherever the authorities were located. Johnny's land use consultant also assisted with getting the property surveyed and submitting an application to the local government for subdividing it. As you might expect, Johnny's application for subdividing was approved by the governing jurisdiction. Upon its approval, he was able to turn the 14 acre property into five separate parcels of the sizes I mentioned earlier. This move in turn forced an additional $122,000 of appreciation. The 122,000 of appreciation was added, value added, to the existing 108,000 of pre-subdivided market value. Bringing the after-subdivided value of all child parcels to $230,000. Not bad, right? I'll say, and it only gets better too. When you consider Johnny's cost to complete the subdividing, he was able to subdivided a cost of just $14,000. That's 14,000 in costs to force $122,000 in extra appreciation. Okay, reading Johnny's example above, you might be eager now to jump head first into subdividing and running this play with all your future deals. If so, I'd caution you to slow down a bit. Subdividing is not a play to rush into, nor is it one that's applicable on every single deal. The correct approach with subdividing, in my opinion at least, is to approach it on a case-by-case basis. I say that after having found that minor subdivision projects usually require a budget of $12,000 to $18,000 in the states that I've performed them in. This is if you hire and leverage a land-use consultant. Costs can be much less if you manage the project yourself, something that I used to do, but no longer do or advise. A budget in that range isn't ridiculous. If you can do as Johnny did and force an extra under $22,000 in appreciation. But it is ridiculous if you're expected appreciation doesn't justify subdividing. An example would be spending $12,000 plus on subdividing that only adds 33. and forced appreciation. This is why you must do the subdividing math ahead of time. Another thing that's ridiculous is to try to do everything yourself when subdividing. I've been guilty of this in the past, all in prey to the superhero syndrome, and trying to heroically handle all aspects of a subdividing project myself. Each time I've made this mistake, I didn't order just to save a couple dollars. I've been struck by the sheer inefficiency of attempting to do an entire subdividing project by myself. Flying solo on subdividing is far from the highest invest use of your time. Not when there are land use consultants who can assist with it, as you saw in Johnny's example. Okay, now for some bad news. The bad news, as you might expect, is that there's more to Johnny's example than you've just read. To be clear, Johnny is not an exception. Some extreme outlier or the absolute best case with subdividing. Johnny was also not blessed with any unfair advantages. He didn't, for example, have insider connections with the local government in the area where he was subdividing. Such connections, if they had existed, would have been convenient to leave out of the story. So would any other unfair advantages, along with the overall reality of Johnny being exceptional. Fortunately, none of that is true. Johnny's story is that of an ordinary guy who started from scratch, learned subdividing, and ran this play to great success the first time he implemented it. What then is missing from our discussion of Johnny? Well, the steps involved. Recall how we began discussing Johnny in the context of money. My goal is to give you a dollars-and-sense view of subdividing. With Johnny's deal, you could see that earnings possible from subdividing, along with the costs required to execute the play. Absent from any of that discussion was the process of actually running a subdividing play. We remained figuratively in the clouds versus descending to the ground and then into the weeds with the specifics on the steps of the play. But let's put an end to that now. Continuing on, here's the how of subdividing, the exact process of doing a deal with this unique and largely overlooked play. Prospecting for properties to subdivide. The process of subdividing begins with prospecting. Unlike other plays in our playbook, you cannot prospect everywhere for properties to acquire. This reflects the fact that subdividing as a play does not work everywhere. Instead, the subdividing play is best suited to some areas, as opposed to others. Which area is? I can't answer that fully here. For one thing, this book doesn't have enough pages to exhaustively list out every single good versus bad area or county for subdividing. There are over 3,100 counties in the US and categorizing them into separate good or bad columns will be way beyond the scope of a single chapter in this playbook. The other thing I should point out is that most investors running the subdivided play focus exclusively on one to two states so that they can become market experts. For this reason, I'd recommend going an inch wide and a mile deep on this play versus going a mile wide and an inch deep by spreading yourself out across too many different markets. On top of that, your own subdividing deals are inevitably going to be different than those of mine, Johnny and other land investors. So it depends the arch enemy of anyone looking for a straight answer. Once again, Rears, it's a villainous head. The good news, balancing out our bad news from earlier, is that we don't have to stop it. It depends. We can remain consistent with the answer yet, get clear on good versus bad subdividing areas by examining some general concepts and categorize at a state level instead of at a county level. These concepts will help you define good and bad for yourself. The first concept is subdivided friendly states. What does it mean for a state to be subdivided friendly? The term means that the US state under discussion tends to be open and receptive to subdividing and development or growth. Generally speaking, states on the subdivided friendly list include Idaho, Iowa, Wyoming, Nebraska, Arizona, the Carolinas, Tennessee and Texas. Special thanks for this list of friendly subdivided states are due to Mike Marshall of Tulosa Property Group. Mike's one of our land use consultant guys. He also happens to be friendly himself and very approachable. So feel free to reach out to Mike by accessing his contact info on our Tools and Resources page at thelandinvestorsplaybook.com. If those are the friendly ones than which again broadly speaking are unfriendly according to experts like Mike. These latter states typically include California, New York, Illinois, Connecticut, Washington and Oregon. Such states are unfriendly in the sense that broadly speaking they tend to oppose development and subdividing. Moreover, when subdividing is allowed, the unfriendly states tend to have lengthier timelines and scrutinized projects more closely. It's pretty hard to ignore the glaringly obvious fact that red states are more open to development and blue states tend to be more difficult and opposed development or at least make it more difficult and lengthy process for a land investor. Following this first concept, here's another one to use in reaching your own understanding of good and bad places to run the subdividing play. The second concept is price per acre. Generally speaking, smaller acreage parcels will sell for more per acre than larger acreage properties. Although this is a general rule, it tends to remain true to larger the gap between the two sizes of properties. You can see this initially by recalling our price per pizza versus slice analogy from a few pages ago. That analogy was an early indication of how pricing increases as acreage decreases. Most land investors don't grasp the fact i.e. price increasing as acreage is decreasing and they stumble with the concept of price per acre. The trouble seems to come from those investors thinking forward in terms of math. You'll need to do just the opposite, though, performing backward math. As clarification on those terms forward and backward math, most people will start with smaller acreage property and make the generalization that the price gets cheaper per square foot or per acre is the size the property goes up. Anyone making this generalization is doing so with forward thinking and forward math. The opposite is to do backward math, starting with a larger size property and working backward. The second way doing backward math is the correct approach. As you can ensure your assumptions on price per acre hold true and potential counties and markets for a sub-divide deal. When you do backward math, you're able to see whether the price per acre goes up significantly on your child parcels. If it does, you can then consider whether the increase is significant enough that sub-dividing would be justified in the Givian area you're considering. Let me say as well that there's a sweet spot to aspire toward in your analysis of price per acre. The sweet spot is when you hit the point of diminishing returns on sub-dividing. Please be aware too that there's undoubtedly a minimum allowable lot size in the potential area or market you're considering. Such a minimum will be the rock bottom on what acreage you can legally reduce a lot down to. Yet again, this minimum will vary by area. Once you have a clear sense of price per acre, you can know whether sub-divide in your area or areas you're considering would lead to true gains or forcing appreciation or whether you'd instead be merely splitting one parcel into additional smaller parcels with the same price per acre. While price per acre certainly matters, don't overlook another important concept when selecting areas for running the sub-dividing play. The next concept is proximity to metro areas. Since proximity is vital to consider because you're in buyers for sub-divided lots, we'll likely base their buying decisions partially or entirely on commute times. A property that is situated within an hour from the heart of a major metro area may offer a shorter commute time to Mr. or Miss buyer and therefore be more attractive to them. Is one hour the hard and fast rule? No, of course not. I would recommend that if you're planning to split up a parent parcel into buildable residential lots though. As an example of that, we'll be taking a 12 acre property and splitting it into five smaller parcels. If you're focused on bigger properties, bigger than a typical residential lot, then you can probably stretch out more on proximity. For the second case, I would recommend markets that are one to three hours away from that metro area. Markets within this radius might be suited for a sub-divide deal where you would split a 40 acre property into three or four parcels of 10 acres plus each. Another point to make on market selection is related to sub-dividing ordinances. Over the years, I've found that land investors often read sub-dividing ordinances and avoid markets based on what they've read. This tendency becomes problematic when an investor is uncertain over items in a sub-divide ordinance and recoils in terror rejecting a market. Rather than seeking to clarify what exactly the ordinance items mean. The truth, as it said, will set you free and sub-divide ordinances are no exception. If you're unclear on anything in them, the solution is to dig for the truth. When digging, you'll be pleased to find that the truth can often be uncovered with a quick call to the county or city in question. Simply picking up the phone and chatting with a government official for a few minutes could make the difference between choosing versus rejecting a sub-dividing area. Think of how easy that is compared to the alternative. The alternative, of course, is to either reject the potential area immediately or else to spend farther time trying to deduce the meaning of the unclear points in the ordinance. Faced with those choices, making a call or trying to be Sherlock Holmes and deduce meaning on your own, which one do you think might be better? The call, right? Then I rest in my case. Building your marketing list. Next up, here's what to do after you've selected where to prospect for sub-dividing deals. This is the point when you pull lists of property owners with candidate sub-divide properties in order to build a marketing list based on your sub-dividing criteria. When pulling a list, you're probably going to rely on a data source. I will keep my recommended data sources updated on the companion site, the landinvestorsplaybook.com, since the best tools are always changing. So please visit the landinvestorsplaybook.com and click on Tools for the most up-to-date recommendations. Within the data source you're using, here are a few introductory search parameters. These parameters can help you find owners for the types of properties that lend themselves well to sub-dividing. Search parameters. One, acre jinkermints. Five acres minimum to 50 acres maximum. Or 50 acres minimum to 641 acres maximum. Number two, the total number of parcels in the county that meet those acreage parameters. Number three, land use codes, especially agricultural, residential, and recreational. You can choose to pull these lists at the county level and once you've found owners and built a marketing list, it's time to send out the marketing. This means sending marketing pieces through precisely the same methods discussed in earlier chapters. Methods, for example, like direct mail, cold calling, and texting. All of those methods are fair game here for your actual outreach to prospects. As for what you say in your outreach, that will vary based on how you want to present prospects with an offer. If you want to lead with the offer, then your marketing message will be that of a blind offer. My recommendation for blind offers on sub-divide candidates, i.e. properties where you could run the sub-dividing play is to hyper-target micro areas rather than market at the whole county level. For these pocket areas, you'll ideally run multiple campaigns. Each campaign would increase slightly on the previous offer amount. You'd begin your first campaign with a blind offer price of perhaps 50 percent before bumping it up to 55 percent on the next or second campaign, and then perhaps 65 percent on your third or final campaign. These numbers are not hard and fast, however, so depending on your risk tolerance or your market, you may start 10 percent or more higher than my example. Don't want to do blind offers? If it isn't your style, then your marketing for sub-divide candidates could be done with the letter of interest campaigns. This is my personal preference when marketing at a county level and not hyper-targeting micro areas. Examples of a letter of interest campaign might be using postcards, cold calling, or text messaging. In any of these instances, your marketing is designed to entice prospects so they'll signal motivation to sell. Those who communicate such motivation would then be the ones for you to make offers to. And just how much do you offer? I covered that a second ago with the blind offers, but I'd like to revisit the offer amount now and provide you with another insight on it. My point now on offers for sub-divide candidates is that you can afford to offer more, depending on the percentage in the deal. It's not unheard of, for instance, to offer up to 75 percent or more for a property which you'll then subdivide. Indeed, developers happily pay 100 percent of market value on a regular basis for both on-market properties and off-market properties. Then the developers add enough value with the development value add to see spectacular returns on their money. I raised this point because it flies in the face of the standard land flipper mentality, the mentality of buying for as low as percentage as possible. We're no longer playing that game when running the sub-dividing play. Subdividing requires an understanding that higher offer price percentages can still be staggeringly profitable. Don't try to negotiate offers below, say, 45 percent on properties that have market value of more than $100,000. Focus instead on adding value, or to put it another way, work to create your own inventory. In addition, I'd like to plan another seed, as I'm always encouraging investors to evolve into true investors and not just flippers. What I'm suggesting is that you might even consider holding a child parcel on each sub-divide project that you complete. Imagine doing this with every single sub-divide project you complete over the next decade. On each project, you'd retain one of the child parcels as a buy and hold investment. You'd then sell off all the rest of the child parcels. The result is that you'd be creating strong comps for the remaining parcel you've held while also driving up sold comps with your recent sales. This truly transitions you from a dirt flipper to a land investor. It's also a bogos scenario as in buy one get one free since you're creating an entire inventory of buy and hold properties that you essentially got for free. That's an entirely different play and well outside the scope of this book, but it's worth planning that seed and passing in case you want to explore it on your own later, as it's one of my personal favorite hacks to building your own empire of land holdings that you essentially got for free. Suppose now that you've made offers and got acceptances. Give yourself the proverbial pat on the back, but then sit down for have more bad news. The bad news this time is that the property or properties in your offers might not in fact be good for sub-dividing. As with other investing plays, you now need to qualify the given properties. Make sure these properties measure up. Qualifying properties. When qualifying properties for sub-dividing, you can either approach it proactively or reactively. On the proactive side, you'd pull a list ahead of time with the aforementioned acreage size criteria. Your list would show properties that contain only sub-divide candidate properties and you'd then do marketing outreach to the owner of these pre-qualified sub-divided candidate properties. As for subdividing reactively, you get a motivated seller whose property happens to be good sub-dividing candidate. In the second case, the decision to sub-divid is reactive since the opportunity to do so came as a bonus. You stumbled onto it as a byproduct of maybe a countywide campaign, for example. This is how I stumbled upon my first sub-divided project. Are you noticing the pattern here in this playbook? Almost every strategic, innovative play in the playbook initially came as the byproduct of me doing a countywide campaign. I prefer the proactive approach nowadays, but my illustrating the reactive or byproduct approach equips you with the perspective to recognize a property as a sub-divided candidate when the lead comes in, even if it was not necessarily a sub-divided marketing campaign. How to qualify sub-divided candidates? Begin by taking a broad look at such aspects of the property as improvements and road frontage. Then to get nice and specific, you can lean on a survey or a plat. A survey will show improvements, typically for one lot or a handful of lots. Surveys are usually done for private purposes, as with an investor who would be conducting due diligence on a property prior to purchasing it. A plat on the other hand will not show improvements. Plats will also show more than one lot, such as a large sub-divided. Using their wider perspective, plat are usually recorded for public use. As farther guidance on surveys compared to plat, here's a quick breakdown of what each depicts. A survey depicts first attractive land, usually just one or a few. Also dimensions of the property. After that location of the property, then also improvements. Now a plat depicts first attractive land, then dimensions of the property, and lastly more than one lot. Seen as plat do not show improvements, why do we care about them? Why not just do surveys? One reason is plat in requirements. A plat in requirement is when the owner of a lot, tracked, site, or parcel must obtain final plat approval for any subdivision or development project. If you find yourself facing plat in requirements, be aware that these requirements often require a lot of time and money to handle. There's also the fact that approval of plat requirements tends to be a discretionary process. Thankfully there are exceptions to platting requirements. A county for example may grant an exception for the owner of a track to land that is located outside the limits of a municipality. This owner might be able to divide the track into two or more parts without having a plat of the subdivision prepared. The exception might be made in this example if all the lots of the subdivision are more than 10 acres and size. Now before you get your hopes up about successfully fighting city hall and getting around plat in requirements, let me elaborate on a few more points. These next points will allow you to see the full extent of platting requirements. This what else you should know when stepping into the wonderful world of platting requirements. First, not every state has exceptions to platting requirements. Moreover, those that do may differ to the counties. Two, in some states the exceptions differ county by county. Three, different types of exceptions exist with some based on acreage, others based on the number of lots and still others being a combination thereof. Four, the key to handling platting requirements is to know what agency has the ultimate subdivision authority over your property. Most often it will be the city or the county, though not always. And to round out this list on a positive note, five, platting exceptions often give us an opportunity to pursue minor land divisions in ways that most investors will never know. The key to that is understanding which land divisions qualify and which don't. For the fifth point above, an example would be in Arizona. The majority of my sub-dividing deals have occurred here. From those experiences in the four counties that I subdivide in, I can tell you firsthand to any land division that results in four or fewer child parcels or any land division resulting in any number of child parcels, all of which are greater than 10 acres in size is exempt from the platting requirement. This means, for example, exemption for a 40-acre parent parcel divided into four parcels, say four 10-acre child parcels. It also means exemption from platting requirements for an 80-acre parent parcel divided into two 40-acre child parcels. So how do you find platting exceptions? Two methods for it are independent research on your own and calling the local government. A third approach is to leverage the knowledge of a local real estate agent or survey company. Recall the knowledge Johnny in our earlier example was able to gain from his specialized land agent? The agents show Johnny which property sizes were ideal for subdividing his parcel into. Depending on the agent's background, they might also have been able to guide Johnny on platting exceptions. It's often tend to just know obscure information like that. It's one of the benefits of being a qualified professional with years in your field. You have unrivaled seemingly insider knowledge, often for the sole reason that you've been doing it, your profession longer than everyone else in that market. At the same time, keep in mind that not all agents are equal in their abilities and it takes an experienced specialized land agent to provide you with that insider intel. Don't expect therefore that part-time agents or newbies can give you this type of pro-input. You're entering investor agent territory with some of this, so I encourage you to be very deliberate when selecting and working with agents and to spend the time to find a great land agent. I've also found calling surveying companies and providing them with parcel numbers very useful. It's also helpful to ask them whether they have done any subdividing in that area and if they know of platting exceptions or minimum lot acreage requirements. I also strongly oppose subdividing without having first consulted an agent. It's not something I do and I wouldn't encourage you to do it either. Instead find a qualified agent and then have a dialogue with them on subdividing. Doing so will provide you with insider knowledge, holds on local rules and on market conditions. For the latter market conditions, a good agent can keep you from inadvertently flooding the market through your subdividing project. In this instance of flooding, you might subdivid a 40 acre parcel into four different 10 acre parcels. The result is that you'd be competing against yourself with four or more of the same listings of your own of the same size being on the market at the same time. This creates too many choices and too much inventory for the buyer, resulting in uncertainty and lack of urgency. It also translates into long days in market and sets you adrift with painfully slow sales. Pro tip. Intelligently sizing the child parcels and strategically releasing your inventory will create the illusion of scarcity and lack of inventory. This also gives the buyer the perception that if they don't act with urgency and close quickly, they may miss out on the deal and there will be no more left. Do consult with an agent. That's my point. And let's not stop there either or on things you should do, why not throw in a few more? Do's and don'ts for play number five. Number one, do subdividing math. This entails establishing what the property is worth whole as is. Then you examine specific scenarios for what the property could be subdivided into. IE for a 15 acre property, you could get three parcels of five acres each or five parcels of three acres each. With these calculations, try to maximize the appreciation that you're forcing. At the same time though, as mentioned above, don't default to always splitting parcels at the exact same size. Make sure you're doing research and thinking critically in each instance, so as to determine and justify the maximum resale potential. 2. Do engage others to assist you. Bring on board an agent in others as well in order to form a team for subdividing. Your team should include a real estate agent along with others like a surveyor and attorney and a land use consultant. 3. Do get multiple quotes from survey companies. The first quote you're presented with may not be the best, so feel free to shop around and survey quotes until you find one that seems most suitable. Also, ask about lead times on the survey. 4. Don't obsess over reading city and county ordinances. A quick call to the county planning and zoning department or the help of a real estate agent could be just what you need to get clear on the specific meaning of such ordinances. You could also pick up the phone and contact a survey company. Survey companies may be doing surveys or subdivide projects within the zip code or even census tract of your property. This means a survey company could be another source to turn to for guidance on confusing verbiage in city or county ordinances. 5. Don't attempt to subdivide yourself. Seek out a real estate agent for their opinion on whether there's demand for the parcel subdivided in the way you think and then a land use consultant to actually do the subdividing work for you. 6. Don't overpay. While you're certainly adding value in a subdividing deal, there's no reason to pay full market value. Remember you're still an investor and you're still an acquisitionist. Just because you're adding value doesn't mean you can't also capture equity too. We typically pay 45% to 75% of market value depending on how much appreciation we can force. 7. Don't leave this chapter without having read the executive summary. Executive summary of play number 5. Here are the five essentials for taking action on the subdividing play. Those essentials as in earlier chapters are centered around mindset, skill set, capital, connections and tools. Mindset. We touched on it earlier but let me say this one more time. It's okay to pay over 50% in market value. You need to get comfortable with that amount or even higher offer prices. Comfort on high offer prices or percentages means dropping the vulture mindset of basic land flipping. You can afford to pay more though never overpay since you're adding value. Skill set. The skills of the successful subdivider include being able to review candidate properties and the ability to do both forward math and backward math on different scenarios. Other skills revolve around project management was a subdividing play requiring you to be comfortable working the phone calling various consultants and to a broad extent engaging in adult babysitting where you keep the project and everyone involved on track and make sure the ball is moving down the field. Capital. You have a couple options when you have a great subdivided candidate under contract. You could for example sell fun the deal. This is admittedly not an option for everyone but it might be for you. You could also rely on other funders and capital partners out there. There are plenty of them to consider. If you're looking for an up-to-date list of potential funders for your subdivided projects feel free to visit the landinvestorsplaybook.com and then click on Tools. Also if you're willing to think creatively you might even be able to purchase properties via owner financing. This might be the most intriguing approach yet for handling capital requirements on a subdividing deal. With owner financing you'd be able to subdivid a property and even sell some of the child parcels. All while you're still buying the property. The caveat here are you need the correct verbiage in the contract allowing you to split and sell properties. You need total transparency with the seller. Now not every seller will agree to this sort of arrangement. Still you should definitely be aware of owner financing as an option and it never hurts to ask about it. A simple conversation with a seller could be all you need to tap into this creative and powerful yet almost unknown land investing play. Connections. For subdividing plays your connections are those people on your team. As a refresher from our dues about teams those people on your team will include a surveyor, a land use consultant, an attorney, maybe a civil engineer, and a real estate agent. Tools. Nothing to see here folks. The tools for a subdividing project are refreshingly simple. All you really need is a data source, marketing tools for sending your offers or letters, and then spreadsheets or other electronic means of crunchy numbers on your deal review. Yes you're going to need a CRM or software and follow-up system. It's going to be critical for capturing and converting those leads. But beyond those tools in a good old-fashioned phone there's not much else. Since tools are always changing if you look for an update list please visit the landinvestorsplaybook.com and click on Tools. There's also not much else to say on subdividing other than it is one of my favorite plays in the playbook. I hope that I was able to highlight just how much of a game changer adding this play to your playbook can be. Now let's move on to yet another powerful play in the next chapter. Hey you've completed another chapter. You're armed with yet another wealth of new strategies. Yet here's the challenge we all face. Our minds is intricate as they are. Tend to let new information fade amid the days countless distractions. Okay? Strategies and knowledge are not enough alone guys. The solution is to become part of a mastermind. I can only share so much in this book format but in my mastermind I can show you exactly where to click your mouse and how to execute on campaign strategies for plays just like this one. Okay? So for those committed to true progress and not just gathering information. I invite you to explore the mastermind vault and join the steamed ranks of the Land Voss mastermind at thelandinvestorsplaybook.com and click on mastermind. Now as a gesture of gratitude for you listening to this book and reading this book you can enjoy a massive discount by using the coupon code playbook. Okay? Eager for more insights? Let's journey to the next chapter and continue to unlock the treasures of this playbook.