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Feb 21, 2024 PropStream

What Is a Subdivision?

Ever wondered about the intricate world of subdivisions and their pivotal role in shaping our urban landscapes? 

A subdivision is a plot of land that has been divided into several plots for individual ownership.

In this post, we delve into a detailed explanation of subdivisions, from defining the term to providing examples and offering insight into the process of subdivision and how it works. Read on to learn more.

Table of Contents

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Key Takeaways:

  • A subdivision is a piece of land that has been divided into multiple parts. Each part can be owned individually.
  • Normally, a landowner or developer chooses to subdivide a property to maximize its potential for generating income.
  • Subdividing land typically involves a feasibility assessment, zoning permit application, land survey, subdivision approval, construction planning, and land preparation, varying with local regulations and zoning laws.
  • Understanding subdivisions enhances market knowledge, aiding real estate professionals when advising clients or uncovering potential opportunities.

What Is a Subdivision?

A subdivision is a plot of land that’s been split into multiple parcels (or plats) meant for individual ownership. Typically, a landowner or developer will subdivide a property to maximize its income potential. 

For example, a farmer might sell a tract of farmland to the city, which converts it into a residential area for single-family homes (aka a housing subdivision), allowing the region to increase available housing. 

Homes in a subdivision are often very similar with minor variations because they are built by the same construction company. However, not all subdivisions are residential. Some are commercial or industrial. 

The History of Subdivisions

what is a subdivision

Subdivisions were popularized during the economic boom of the post-war era—a time when demand for private homes was high, but space in urban areas was limited. 

At the time, real estate developer William Levitt was a key figure who planned and built large residential communities in New York and other East Coast areas. Some were even named Levittown after him.

Since then, subdivisions have become widespread across the U.S. 

The Subdivision Process

Though local regulations regarding the subdivision process can vary depending on the region and local zoning laws, it generally follows these steps: 

Feasibility assessment. Before considering a subdivision project, the developer must assess its feasibility. Is the land suited for residential use? Is there enough market demand for single-family homes?

Zone approval application. Once the project is deemed feasible, the developer must apply for a zoning permit from the city or town. The zoning permit may stipulate allowable land uses, lot sizes, setbacks, and other development criteria.

Land survey. With a zoning permit, the developer can commission a land survey. A licensed land surveyor creates a detailed plat map showing the property’s boundaries, existing easements, rights-of-way, encumbrances, and how the land will be subdivided into individual lots.

Subdivision approval. The subdivision map is submitted to the city for approval, after which it is recorded in court to make the subdivision legal. 

Construction planning. An engineer reviews the approved subdivision proposal and uses it to create a construction plan, which includes designs for roads, utilities, and drainage systems to support the newly created lots.

Land preparation. Eventually, the land is graded, roads are constructed, and utilities are installed. Once this is complete, the property is finally ready for sale or construction. 

Why Real Estate Professionals Should Understand Subdivision

what is a subdivision in real estate

Understanding the subdivision process can be a significant advantage to real estate professionals. 

For example, a real estate agent familiar with a local subdivision (or one in the making) can provide buyer clients with more housing options. Similarly, a real estate investor who knows suitable areas for subdivision could uncover lucrative investment opportunities. 

Ultimately, understanding subdivisions increases your market knowledge. Savvy investors and agents can run comparables (“comping”) to assess property values. In fact, PropStream recently re-released its subdivision comping feature, letting you factor in subdivision property criteria to your comps, like:

  • Zoning codes
  • Building materials
  • Architectural design/layout
  • Amenities/infrastructure (e.g., parks, schools, pools, transportation, etc.)
  • Property type (e.g., condo, single-family home, apartment, commercial)
  • Developer reputation
  • Market trends

To learn more about comping, sign up for our Academy course “The 5 Steps to Successful C.O.M.P.S.”

Ready to run your first subdivision comparable? Try our free seven-day trial and get 50 leads on us!

Frequently-Asked Questions (FAQs)

What’s the difference between a subdivision and a neighborhood?

Though often used interchangeably, subdivision and neighborhood have slightly different meanings. A subdivision is a tract of land split into multiple lots for individual ownership. A neighborhood is an existing community defined by a geographical area. It has a looser definition and may include many subdivisions and amenities, and there are typically no strict boundaries, HOAs, or other regulations. 

What’s the difference between a subdivision and a suburb?

Subdivision and suburb are related but different terms. A suburb is a residential community located on the outskirts of a city. Though it often includes subdivisions, this is not always the case. Suburbs can also evolve without a formal subdivision process. 

How does the subdivision process impact property values?

Subdivision can impact property values in various ways. On the one hand, it can increase property values by generating more housing stock for sale, improving infrastructure and roads, and attracting a more diverse market of buyers. On the other hand, it can decrease property values if it results in an oversupply of similar properties.

Are there risks associated with investing in subdivisions?

Yes. Like any real estate investment, investing in a subdivision involves risk. Specifically, it is subject to regulatory and zoning challenges, construction and development costs, market fluctuations, financing and capital constraints, and more. Before investing in any real estate, we recommend consulting a legal professional and performing your due diligence to ensure you understand the nuances of the investment.

How do zoning regulations affect the subdivision process?

Local zoning regulations play a central role in the subdivision process. They regulate land use, density and lot size, setback and building height, easement and right-of-way, infrastructure and amenities, environmental considerations, and more.


Published by PropStream February 21, 2024