Newbie Questions
I am newbie in development and I am very interested in getting started in the field. However, I don't know the first thing about it; apart from finding the land I am lost. I am reading through as many posts that I can and I am continuously working on getting educated in this but some of you guys are more seasoned in this and can help me avoid pitfalls.
I am an investor and I do mostly rehabs but I want to venture into development (bigger profit if done correctly).
If you can answer some questions I would appreciate it.
1. Is it hard to get finances to develop SFH?
2. What are the most common things I need to think about when getting into this?
3. Do you usually get your property sold before finishing your development and is that good or bad?
4. I’m in South Florida, what should I expect to pay to get a house completely done?
5. How do I find a good developer to work with (I know, www.google.com, but if someone has any recommendation I will take them too)?
6. What should I do when I look at a piece of land to evaluate if it is a good deal or not?
7. Do I need allot of money to get started?
Regards,
Chris
Chris,
Thoughts concerning some of your questions...
Define your objectives. Some may disagree, but my view is that a developer is somebody who enhances the value of a property by taking some action and then selling. That action can be subdividing, or getting a change of zoning, or getting some kind of zoning approval (variance, special exception, etc), installing horizontal improvements. A developer is not necessarily a builder, but can be one. Builders can be developers or not.
So, decide if you want to be involved in the property from start to finish or get in and get out relatively quickly. Some developers believe there's more money to be made in land (and fewer headaches) by never sticking a shovel in the ground.
If your question #5 means how would you find builders, google is the last place I'd recommend. Instead, after you decide on a geographic area, I would investigate who is building what where and I'd go to those job sites. I'd also query the municipalities to find out what builders have properties in the approval process pipeline.
There are different ways of evaluating economic feasibility (rules of thumb and pro formas), but they all come down to:
site yield, what can be built, what will the finished product sell for, cost of horizontal improvements, and other expenses.
You could never overestimate the importance of doing due diligence. What you need to know will largely depend on the particular property and proposed development scenario. You will need a real estate attorney experienced in land development and a civil engineer & surveyor, for starters. The need for additional expertise will be dictated by the particular situation.
Nancy:
Thank you for your quick reply; I am looking to be a developer from start (buying land) to the end (finished getting a home built) apart from doing it my self that is.
I did buy your book yesterday so I will go through the book ASAP too.
Can this whole project be done with little money out or does it require allot of money down?
Regards,
Chris
Chris,
You might want to read the posts here concerning categories of cost:
http://www.thecreativeinvestor.com/ViewTopic25857-26-13.html
The costs are going to vary widely depending on the property and scenario. If a property has enough frontage on an existing street, horizontal improvements would be minimal. Number of lots, subdivision layout, municipal approval terms and conditions, land acquisition cost, the cost factor of hiring a builder. etc. Many factors play into cost.
Thank you; I will read through it, what you are talking about right now is somewhat greek to me (frontage..etc) but I will get the hang of it soon.
Regards,
Chris
Chris,
If a parcel has limited frontage on an existing street, in order to subdivide it usually a new road (or roads) will have to be constructed so that all of the lots will have access to the existing street. Putting in a new road can cost, depending on the length, installation of utility lines, etc.
On the other hand, if the parcel is wide enough (more frontage on the existing street) so that when the subdivision is done, each "new" lot has its share of frontage on the existing street, a new road won't have to be constructed, and the new lots can also access whatever utility lines are already in the existing street. This saves money and also time.