Land Development - Newbie

[Ben Glaser]

I recently came across a property that was pre-platted. I thought I could do an easy flip to a builder, but it got overly complicated and I ended up backing out. Mostly due to issues with the land itself and the high development costs.

But it got me thinking that there is opportunity in undeveloped land. Builders need land, many of the large home builders near me would rather buy lots than large parcels of undeveloped land.

I've identified 3 great spots. I've done some preliminary research. Based on some other developments I know what builders are paying for raw land, lots, and how many lots they are getting on average per acre. I've also talked to a few of the excavation companies and have a rough idea of what the sitework would cost.

NOW - I reached out to 2 of the owners. Both are somewhat interested, but not motivated. I'm sure I can get one of them to accept a contract from me for the right price.

But there are a lot of unknowns, since I've never done this.

1) What is the time line for a project like this?
2) How do developers ride out these costs over a long development period?
3) Should I try to partner with an excavation company?
4) Do banks ever take a carried interest in a project like this?

I'm sure there are 101 other questions I could ask, but I don't even know where to start. I need to be able to figure out all the details before I end up asking for investors etc.

[Jay Hinrichs]

to answer your questions in order

Time line is dependent on the jurisdiction. from 1 year to 5 years or more depending.

they pay cash for the dirt and sometimes get a 50% loan but most of the time its 100% equity IE cash

U might get an excavation company to partner but going to be pretty rare for a beginner.

banks do not partner at least from what I have seen over the last 20 years back in the 80s this was common for banks.  Private Lenders will do participation mortgages I have done a handful for borrowers.