Starting a New Business. Looking for Advice.

[Daniel Flesher]

I am a licensed architect living and working in Philly. I have an idea for a business but wanted feedback from other investors to see if this is something that people would be interested in. I also wanted to look at the potential pit-falls that I might not see because of my inexperience in real-estate investing. 

The basic model of the business is that I would purchase property, most often land, then create the zoning and building plans, and sell the pre-developed property for a profit to a real-estate developer. 

The potential benefit to developers is a shorter turn around for their projects. They purchase the land and the architectural plans are already completed. I already work with a lot of developers so I am aware of zoning laws, what developers are looking for, etc. I can also crank out a building set on my own in roughly one month (anywhere from single family to six units). So in the time it takes for me to close, I can have the project ready to go back on the market. 

The potential downsides to me are the closing costs on the property, buying/selling fees, carrying costs if it doesn't sell quickly, designing something that a potential buyer doesn't want to use and potentially limiting my buyer base by excluding non-developers from by buying pool (unless it's single family). 

I'm wondering how I should structure the business to limit my liability, and show as much "loss" on paper as possible to reduce my tax load. 

My questions are:

Is there any business structure that would work best for this?

Does anyone else think this is a good idea? Would you buy from someone who is doing this?

Is there another opportunity I am missing, such as wholesaling if I can get the plans completed fast enough?

Are there other downsides I am missing?

Thank you all for your responses!

[Colin L.]

I think it could be a great way to break into the development world. I see lots of "shovel ready" or close to shovel ready projects on the MLS here in San Diego and I've created concept drawings for investors who ended up selling the dirt w/ the plans. I'm not exactly sure who is buying these lots but my guess is they are developers with their own building crews who can build for less than a developer who hires a GC.

 The key would be to find lots w/ motivated sellers so you are building in a profit similar to a wholesaler.  I wouldn't want to do this if I couldn't make more than my usual design fee, because although you avoid the risk of actually building it, you are still on the hook as the architect of record and like you said there is the risk of holding the property too long.  

As far as business structures, many that I know of have two business entities, one for design and one for development.  Your professional liability insurance provider would probably be a good source of information on this.  Also check out the podcasts "business of architecture" and "EntreArchitect", they both have interviewed several architect/developers.