Are you ready to start a land development project?
There are quite a few recommendations to consider before you get started.
Fortunately, we’ve got the top things you should know before you pursue land development.
Let’s get started.
1. You should understand the land development process
Land development can be a long process, and as such, you should know what you’re in for before you begin.
Raw land development is defined as the process of purchasing a parcel of land with the intent of either developing it or building on it.
Some people will also purchase raw land with the hope of holding onto it for long-term appreciation.
As an extremely valuable asset, raw land and its development have the opportunity to provide the same type of benefits as other more traditional investments.
However, it is more difficult to pursue as an investment.
To ensure you don’t encounter more obstacles than necessary, you should familiarize yourself with the land development process you’ll be following.
Here’s what you need to know.
Evaluate the economic feasibility of your land development project
Land development is ultimately an investment of your time, energy, and money.
Before you begin the process, make sure you understand what type of financial resources you will need.
What are the estimated costs?
What about revenue?
What type of return can you expect overall?
Having this knowledge before you start the project will be beneficial to you as you proceed.
Determine the offer price of the land
You’ll need to determine an offer price at this point in the game.
First, you’ll want to figure out the max amount you are able to pay after project costs are taken into account.
Your estimate of project costs should come from actual contractor bids.
You will then want to get an estimate of the market value of the property.
The goal is to buy below market.
This way you have more money for construction!
Find out the zoning of the land
What type of property should be constructed on your parcel?
How will you present the property to buyers?
Zoning will ultimately play an important role in how you proceed in developing the land.
For example, you can’t build a condominium on land zoned for single family residences.
Don’t let zoning hinder your investment approach.
Make sure you check beforehand!
Secure your financing for the land development project
The way you’ll develop the property will dictate the financing you receive.
Investors often care about the loan-to-cost (LTC) ratio the most.
The LTC is the amount of money that the lender will provide for the project compared to the cost of the project, and this is often dependent on the type of construction and the land use.
Be careful to consider holding costs when looking at financing.
Development projects can take time and you may find yourself making payments for several years before your development work is done.
It’s important to know that you will have the means to make these payments.
Begin to build within zoning laws and local restrictions
You’re getting there!
You’re at the point in the process where you can begin construction.
Make sure you build within the zoning laws and according to local restrictions.
Market the land and property to sell
The final step of the process is marketing the land so you can sell it (if this is what you want to do).
Your marketing strategy should be based on your neighborhood, market price, and demand.
So, have a plan in place that will attract buyers based on these core tenets.
Many land developers will choose to work with a realtor, list their land online, advertise in the newspaper, or post on social media.
2. You should note the presence of floodplains and wetlands
Floodplains and wetlands are environmentally sensitive areas, and as a result, can impact your land’s buildable areas.
Floodplain limits are delineated by FEMA Floodplain Insurance Rate Maps (FIRMs) while wetlands are defined by the US Army Corps of Engineers and other Jurisdictional Waters of the U.S.
Both floodplain and wetlands mitigation can be time-consuming and costly.
Floodplain mitigation takes anywhere from 3-6 months to a year.
Wetlands (if over 0.1 acres or greater than 200 linear feet of a stream) take a year to 18 months to permit.
One option is to use a program like MapRight to check for wetlands and flood zones as a starting point for your investigation.
If you are interested in a MapRight subscription, you can use our referral link.
3. You should research any other present restrictions
Some land has more restrictions than others.
If you’re hoping to move forward with land development, you’ll need to work through potential obstacles.
These include deed restrictions, easements for utilities or access, water wells, gas wells, drilling sites, railroads, airway paths, etc.
Depending on the restriction, you’ll need to pursue a review with different agencies.
The necessary time and potential fees will vary for this.
4. You should investigate the availability of utilities on the land
The proximity of utilities to your land is important for its development.
You’ll need to evaluate water, sewer, stormwater, gas, electricity, fiber, and cable.
Do you have all of these readily available?
Do you require any off-site improvements that are necessary to accommodate your plans?
Determine whether or not the land has access to utilities early.
Only then can you create a plan that will help foster success.
5. You should see how you will have access
Access is another critical component when it comes to the conversation about land development.
Ask yourself if you’ll have the access you need for your land development.
Does your property have both physical and legal access?
Are there sufficient roadways?
Will you need to do roadwork as a part of your development?
Is there a driveway already?
If you are building in a rural area, keep in mind that you will likely not be able to develop land that does not have legal access.
In more built-up areas, roadway improvements, driveway accesses, and off-site improvements are often triggered because of high-density traffic demands, so it’s worth considering whether this needs to be part of your project.
Conduct a traffic impact analysis to gauge the answer to these questions.
This analysis normally takes about 60 days and costs anywhere from $7,000 to $15,000 depending on the scope of the project.
6. You should evaluate the detention basins available on the land
They provide general flood protection and can help control extreme floods.
Detention basins are typically built during the construction of new land development projects and may be required in your area.
Depending on the requirements in your area, the detention basin may restrict your property’s buildable area.
Fortunately, detention calculations can be done as a part of the design process with no additional delay.
Just make sure you factor this in as you do your plans.
The costs will vary depending on both the size and location.
You can build them either at the surface or underground.
While surface ponds are more affordable and easily maintained, they require valuable real estate some would rather keep for other development.
7. You should note the landscaping requirements of the land
Some municipalities have landscaping requirements.
Look into this before you begin land development.
Look for trees on your site and evaluate any landscape setback requirements, open space requirements, maximum impervious coverage requirements, and screening requirements.
Better to know what you must do rather than wait until the last minute or face tree mitigation credits if you cannot provide tree replacement.
8. You should find out what the impact fees are for the land
If you are going to develop land in a more heavily-developed area, you may face impact fees.
An impact fee is imposed by the local government on a new or proposed land development project to pay for all or a portion of the costs of providing public services to the new development.
Typically, impact fees are charged for water, sewer, and roadways.
They may be charged separately or combined depending on the site permit.
Most of the time, you’ll pay them when you purchase the permit.
9. You should understand each phase of land development
There are three phases of land development that you should be aware of: the research and analysis phase, the contract phase, and the development phase.
In this section, we’ll discuss each one and what you need to know before you begin.
Research & Analysis:
During the research and development phase, you will gather, review, and process information about the land you’re going to develop.
If you do not create a thorough and detailed analysis, then you won’t have a clear sense of the profit margin, price, and product.
Do your research!
It’s valuable information to have throughout the entire experience.
After you’ve done your research, it’s time to get a contract signed so you can continue into the development stage.
This is the actual development or vertical construction phase of the project.
In this phase, you’ll want to maintain strong project management and a schedule.
This can drag on for months longer than you first anticipate, so it’s important to stick to your plan and persevere despite any unexpected delays.
10. You should avoid common design mistakes
Don’t haphazardly design your space once you have the opportunity to create a development plan.
Even designs that may seem efficient are filled with wastes of space.
Here are some common mistakes made.
Rainfall and stormwater management are becoming increasingly important.
Be sure to account for stormwater management early in the design phase or you end up with costly water infiltration issues.
Intersections take up space while being highly costly.
Not to mention the fact that they don’t add any safely to your development.
Don’t add them unnecessarily!
Consider varying home setbacks.
If you alter the home’s standard distance from property lines or other buildings (be sure to check with local regulations), then it can create more lots per acre with less street needed.
To get the best design possible, it’s best to hire a civil engineer to complete the plans for you.
11. Beware land development pitfalls
Are you looking to avoid other people’s mistakes?
You wouldn’t be the first.
This is one of the top tips people look up before starting any project…how else can you ensure your own success?
The most common land development pitfall is misunderstanding the timeline.
Land development takes much longer than you may realize.
Thus, not realizing how long site inspections will take to get done, how long it may take to meet with city officials, or how much time it will take to meet neighbors or your HOA is a big oversight.
Go into the process expecting this, and you’ll be ahead of the game.
12. You should develop a checklist before pursuing land development
Are you curious about the best way to develop land?
You’re not alone!
Many people are interested in the prospect, but they’re not quite sure about the process.
Fortunately, we’ve got a checklist you can follow when you’re pursuing land development.
Ask yourself: Why are you interested in this property?
Investigate if any governmental entities have jurisdiction over the property
Check if the property has been recently surveyed
Find the gross and net size of the property (developable area)
Check the price of the property and the requirements of the transaction
Look at the physical improvements on the property
What is the condition of the property? What approximate value would you assign it?
Research the zoning and land use for the property
Check to see if there are any physical encroachments from neighboring properties
Check to see if there are any existing easements or covenants on the property
Find out if the owner has any other conditions on the land or if there is right-of-way dedication required
Look for power lines or transmission lines crossing the property
Investigate the available utilities: Are they available from the government? Would you need to install them? Would they need to be extended?
Consider the best use of the property
Inquire if the landowner would be willing to sign an option agreement
Walk the property and take site photos
Check for the following features:
- Rock outcroppings
- Low areas
- Water elements
- High points and ridgelines
- Landforms/unique natural features
- Views and vistas
- Sounds and smells
- Cultural and historic resources
Consider whether your land is characterized by or exposed to the following:
- Poor soil(s)
- Soil erosion
- Geologic hazards
- Unusual noise, vibration, or smells
- Ingress and egress limitations
- Poor surface drainage
- High water table
- Proximity to industrial facilities
- Unsightly views
- Upstream dam
- Railroad tracks
- Heavy air or vehicular traffic
- Any other actual or apparent safety concerns
- Any areas where special consultants would be needed
Take inventory of natural resources
Check out the topography, forest cover, natural or man-made bodies of water, wildlife, soil, rock, steep slopes, plant communities and species
Check if there are any U.S. waters on the site (as these can pose additional restrictions)
Conduct soil borings to determine depth
Investigate the potential access points or routes
See if there are any hazardous materials that will require clean-up
Note whether preliminary perc tests have been conducted
Find out if and where there are wells located on the land. What is the well depth? Was the well tested?
Find out if the property requires a septic tank
Research if there are fire and police services provided to the area where your land is located
Research if there is trash pick-up to your area
Note whether there are any special local environmental regulations (critical area, water quality protection area, etc.)
Investigate if there are any threatened or endangered species on the site
Note whether any portion of your property has been classified as historically or archaeologically significant
Investigate the local attitude towards new development
Research what types of studies or permits are required in your area before you move forward with developing the land
Note the costs that you will incur during development
Lot sales prices and pace
There you have it!
Everything you should know as you’re getting started with the land development process.
Additional ResourcesIf you are looking to buy affordable land, you can check out our Listings page. And before you buy land, make sure you check out Gokce Land Due Diligence Program. If you are looking to sell land, visit our page on how to Sell Your Land.
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Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.