Developer Question on Platted Property

[Melissa Jolley]

Hello all!

I have a question for those who deal with commercial development. There is a property that was purchased for a small subdivision (around 150 lots) in my area- it was never fully developed and was foreclosed. It has been fully entitled with plat maps as well. The property is around 60 acres. This area is in serious need of affordable housing and the property is zoned for multi or single family. 

Unfortunately, the property had some issues related to wet land and was on the market for a while. The DEP issues have been ironed out and the city/county are ready to have the land developed.

Question- what specifically do developers look at when evaluating raw property? Is it a benefit that the plans are already in place? Is there a percentage of land cost that developers like to stay under based off of the future value of the developed land?

[Joel Owens]

Affordable housing even though their might be a big need usually doesn't pencil for new development.

Labor, legal, land, and material costs are all UP. That means you have to be able to get high rents to make profit or you have to look into LIHTC type projects or get funding from government to offset development costs.

Developers would rather typically develop regular renter construction, student housing next to colleges, retirement communities, or senior housing, etc. Usually much higher rents per door.

Affordable housing can work on older existing buildings purchased at low cost per sq ft where with renovations total cost is still much cheaper than ground up new development. That is why you see all these syndicators taking B to C type buildings buying cheap and renovating them to try and up rents.