5 Things to Consider Before Building a New Subdivision

Building a new subdivision on the edge of a booming town is perhaps the top of the mountain for a successful real estate investor, but it’s also not a project that should be taken lightly no matter how profitable your past ventures have been. Below are five of the most important things to consider before you start building homes in a brand-new neighborhood.

#1 – Population

It can be tempting to build a subdivision in a town that seems affluent on the outside, but it’s critical to really analyze the population. If it’s a town of 10,000 people and you’re interested in building 10 homes in a new subdivision, don’t forget that you will need to find 10 families, and in such a small town, that may not be as easy as it seems. Look for more populated cities that have incoming jobs and strong economies as those are the ones that are most likely to experience growth.

#2 – Local Economy

The cost of living – and the entire economy – can vary drastically from one city to the next. Rents in City A may be an average of $1200 while rents in City B just 20 miles down the road might be $1800 or even more. Things like job availability and growth, nightlife, tourism, shopping, and more can all impact a city’s economy, so before you break ground on a new subdivision, be sure that you’ve researched and accounted for the various economic factors that may help you turn a profit.

#3 – Crime Rates

Crime exists everywhere, so while you will never be able to build a subdivision in a town that is 100% crime-free, you certainly can do your research beforehand and choose a city with low crime rates. What’s more, in a larger city, you should also research where most of the crime occurs. If 55% of the crimes in a city occur on the north side, then it may be better for you to build in the southern part of the area, for example. When you build in an area with less crime, the homes become more desirable and therefore have a higher overall value.

#4 – Shopping, Restaurants, Parks, and More 

People – and especially families – enjoy living in locations where there is plenty to see and do without having to drive for miles and miles to see or do it. Scope out a location for your subdivision that is within reasonable distance to shopping centers like grocery and department stores, and make sure there are at least a couple good restaurants nearby. Parks are absolutely critical as they add significant value through desirability, so be sure that you’re building near (or even between) some popular playgrounds or botanical gardens. You might even choose to build your own park on the edge of the subdivision.

#5 – Jobs

Many investors look at an area’s overall unemployment rate to get a feel for the jobs in the area. They believe that if the unemployment rate is consistently low, then more people in the city have money to buy homes since more people are working. In today’s economy, this isn’t always true. Look at the types of jobs in the area. If the area is home to doctors, lawyers, and engineers, then the theory that more people can buy brand new homes is absolutely correct. If most work in lower-paying blue collar positions, it keeps the unemployment rate low, but the average annual income is also quite low and may not be enough for filling a subdivision filled with brand-new quarter-million-dollar homes.

Though building an entire subdivision can be an incredibly profitable experience, it’s important to take the time to carefully consider these factors before you start hiring the builders and buying the materials. Things like the population, crime rates, amenities, and even the local economy will all play a significant role in helping you find the perfect area for your new neighborhood.