Development Opportunity but limited experience

[Kesha Hamilton]

I'm a licensed Realtor and investor. There's an awesome opportunity to purchase a large parcel of land that is prime property & location for development. I've sold new construction but never developed homes and it was suggested that JV'ing with a developer would be ideal. My business partner has purchased large parcels of land, but never developed homes. How would you approach this type of project if you have the ability to purchase but limited experience on actual development? Maybe agreeing to a % from the sale of each home in addition to listing the homes once the construction starts?

[Kristi Kandel]

Quote from @Kenneth Bell:

@Kesha Hamilton

Hey Kesha,

I would also not buy land until you have done all needed DD and have an exit that will work. If you can tie up the land and give yourself enough time so see if the value is there. You also need to understand what the current zoning is and and current development value. You could possibly rezone for greater density if possible. Until you have a proper valuation for raw land you cannot make an offer. Land valuation is a derivative of the value that can be placed on the land. This takes some dd and homework to come up with.

 @Kenneth Bell thank you! I was just explaining to someone the other day about how land is priced for development / redevelopment and why there typically aren't sales prices on those listings. Being a developer means you find the highest and best use for a piece of property. EVERYONE has a different idea of what that highest and best use could be based on their experience and experience along with the AHJ's allowed uses in the zoning/probability of rezoning. 

With that being said, since there are so many variables that exactly why a property owner would be shooting themselves in the foot if they set an asking price b/c their idea of what the highest and best use might be might not actually be the actual best use. 

For example lets take a paved parking lot:

1. You could rent it to a food truck to use 1x a week for $100 a day or $400 a month

2. You could rent it to a plumbing company to park their vehicles for $1200 a month

3. You could build a flex-space building for the plumbing company to relocate their office and warehouse AND have enough parking and now you get 5-10K a month or more in rent. 

Each way you're making money on the property, it just depends upon the type of use you can envision. Each scenario would change how much each person could pay for the land to make it profitable for them.