I Have Questions About Real Estate Developemnt

[Josef G.]

Hello so I am 19 and I plan to begin investing in real estate development within a few years.. i have come to gain a good amount of knowldge reading forums online but I have a few questions... 

I will be developing in the Bronx and Newark NJ 

Questions: 

1. What is the average cost per square feet to build in these to locations?

2. Roughly how much of the gross income should I calculate for taxes and other expenses.

3. On average what percentages do banks loan.. so my scores is a 725.. let's say it cost 800,000 to build what percent will they loan to me?

4. Any good books you recommend I read that will increase my knowledge in real estate development

THANKS FOR ALL WHO REPLY :)

[Ryan Goldfarb]

Originally posted by @Josef G.:

Hello so I am 19 and I plan to begin investing in real estate development within a few years.. i have come to gain a good amount of knowldge reading forums online but I have a few questions... 

I will be developing in the Bronx and Newark NJ 

Questions: 

1. What is the average cost per square feet to build in these to locations?

2. Roughly how much of the gross income should I calculate for taxes and other expenses.

3. On average what percentages do banks loan.. so my scores is a 725.. let's say it cost 800,000 to build what percent will they loan to me?

4. Any good books you recommend I read that will increase my knowledge in real estate development

THANKS FOR ALL WHO REPLY :)

There is no better way to set yourself up for success than to start young. Remember to play the long game; shortcuts aren't worth it if they jeopardize your long-term vision.

Regarding your questions:

1. Impossible to say as it varies greatly, but your cost per SF will be higher in this part of the country than most others (higher labor costs due to high cost-of-living, etc.). The nature of the building will also dictate your costs -- a 2-story, 2-family home will have a different cost structure than a 16-story high-rise apartment building (which requires a different type of construction, elevators, etc.). For hard costs (note that this doesn't include soft costs) on a no-frills 2-family on a standard lot in a place like Newark, your starting point could be somewhere in the $150-200/SF range. Again, note that this doesn't account for the cost of the land, soft costs, site cleanup, or anything out of the ordinary that may pertain to a specific deal.
2. As was mentioned above, property taxes are public record. If you're developing, your tax assessment will change post-construction, which will, in all likelihood, increase your tax bill.
3. If you're seeking a loan for development (i.e., new construction), a bank will look at your loan as a commercial mortgage rather than a residential mortgage. As such, your credit score won't affect the pricing or terms of the loan all that much, though it still behooves you to keep your credit strong as banks will scrutinize your deal harder without good credit. The LTV will depend on whether you own the land or are seeking a loan to purchase that as well. Commercial lenders will have different loan programs with different terms. Rates will vary a lot, too, and your options will depend on the economic climate (for example, your financing options as a developer are vastly different today in 2016 than they were in 2008-2009). Nowadays, if you own the land, you can typically find a lender who will loan 70-75% of the construction costs, sometimes on an interest-only basis. YMMV here.
4. (Not all real estate related) Rich Dad, Poor Dad, The Millionaire Real Estate Investor, The ABC's of Real Estate Investing. J Scott's books (search Amazon for them). There are many good ones.