Land development for a new housing community

[Kaiser Saeed]

Hi, I am a RE agent in North Texas & performing due diligence towards building single family homes (between 10 & 12) on a piece of land in Dallas Texas. I am a bit confused about who owns the land development and it's cost such as road, utilities, water etc. I have heard it both ways, it's all builders responsibility and also it's a partnership between the city and the builder. There may even be third option - don't know. The taxes from these future homes will go the city, which makes me think city will likely have some contributions towards this. Has anyone came across such a scenario & share how this works? I have been bounced around a few phone calls but haven't ended up with the right folks to answer my question; although I feel this should be a fairly straight forward to answer. I welcome any commentary to help with this.
Thanks,
Kaiser

[Barry Ruby]

@Kaiser Saeed Hi Kaiser, typically a developer owns the project. A builder typically is the party that constructs the vertical improvements (homes).

The developer may or may not construct the horizontal (on on off site) and or vertical improvements and only obtain entitlements (permits) and elect to sell or JV the permitted project to a 3rd party builder that does the site and vertical work.

A developer typically forms a single purpose LLC and vests in it as its general partner. If the developer wants or needs help funding the equity required he/she will introduce an investor. The investor will vest in LLC as a limited partner. Equity generally is 25% of total project cost with the remaining 75% funded with bank debt.

As the GP, the developer has 100% control of the LLC. A typical split has the LP putting up 90% or 95% of the equity capital in exchange for a 70% to 75% split of the profits.

Hope this helps

I am forming a cost free private Facebook group focused on CRE and ground up development to address these issues and other related topics and invite you to join when it goes live.