Land Subdivision Process

[Nick Burkhardt]

BP Land Developers/REI,

I'm trying to understand how a potential deal would work and need some help/advice on buying raw land and subdividing lots off of it and then building my dream business (Biergarten/Wedding Venue). I have a deal in mind...

Part 1
$220,000 for 46 acres, some of which over looks a beautiful lake in Maine. There exists a master plan (which would need to be tweaked for my idea - read on!) for ten 1-1.5 acre lots. There is a rough cleared road, but no actual road/water or electricity. My first question is if I put down 30% to secure the land (66K - all my capital), could I immediately begin selling the lots?, taking the profit and using it to build the road, bring utilities to the lots etc. Basically just do one lot at a time? My market demands about 60K for a 1-1.5 acre lot. Assuming each lot requires 20K to develop (is this a decent estimate?), say the first lot sells, I develop that lot and 2 others. Those 2 sell and I have 120K to develop the next 6 lots. Those 6 sell and I develop that final lot for 20K out of my 360K profit. Leaving me with 340K profit. Does this all sound possible? What am I forgetting?

Part 2
I've used 15-20 acres on the subdivision and now have the capital necessary to develop my dream business of owning and operating a biergarten/wedding venue. The open air pavilion would look out over the lake and the biergarten would serve as the reception space when weddings are booked. I would do much of the clearing and building myself as my family owns a construction company, but I would basically just build as much as possible for the 340K on the remaining 26 acres of land.

Is this possible in the order I've laid out? Thanks so much!!

-Nick

[Barry Ruby]

Hi Nick, 

Your 1st priority should be to run a preliminary analysis to see if it works for your intended development plan. Part of that analysis should include a critical path to determine the the time, milestones and cost associated with proving the project "on paper". Be sure to include the time and cost associated with "tweaking" the existing master plan.

If the project looks like it works on paper, your 2nd priority should be to place the property under contract using the critical path and budget you created by doing the analysis described above. The Closing Date on the property should be tied to a point in time that has the property and project you envision fully entitled in a manner that will allow for the development and operation of the project AND when you have secured 100% of the debt and equity capital needed to develop your project.

Your 3rd priority should be using the time provided in the purchase contract (from mutual execution of the contract to closing) to conduct all of the due diligence activities cited in the critical path and any others you may encounter during the DD process.

After Closing, your 4th priority should be to develop the horizontal improvements (roads & utilities) to produce finished lots and to then sell the lots to 3rd parties and use those funds to cover all or part of the cost to build "your dream project".

If you are interested in taking on Priority 1 (critical path and budget) DM me and I will send you an Xcel worksheet that can get you started.