How to Jump in the Land and New Construction Realm

[Jims B.]

Hello everyone!

Just curious to see how people in this community started when venturing into the land and new construction aspect of investing. Can anyone provide some guidance on how to get started with investing in land and new construction projects, including key factors to consider and initial steps to take? If anyone can do a break down from start to finish, it would be greatly appreciated. Thank you all for your responses and every bit of insight helps! 

[Ryan Treacy]

As an architect who has ventured into land and new construction investments, I'd be happy to share some guidance on how to get started. I’m not a professional in acquisition or financing, but I’ll share some thoughts from my personal experience.

Building Codes and Zoning Ordinance: research your local zoning laws and building codes. You want to make sure that you’re legally allowed to build the type of building you have in mind. Things like number units, height, area, number of stories, etc are all specific to a building’s lot. Be sure to cross reference the zoning code and building code as they don’t always align, and you’ll need to defer to the more stringent code. Ordinances and codes can be complex and lengthy, I would recommend engaging an architect to assist and give in-depth analysis.  

Land Acquisition: Look for land in desirable locations with good growth potential. Perform due diligence, including soil tests, environmental assessments, and surveys to ensure the land is suitable for construction. Understand if the land is a greenfield site (land that has never been developed) or a brownfield site (land that has had previous development). Brownfield sites sometimes require soil remediation or removal of previous buried construction.

Financing: Secure financing for both land acquisition and construction. In my experience it’s much harder to get funding for new construction compared to a renovation. Explore options like construction loans, private investors, or partnerships. Keep in mind that lenders typically won’t fund the land purchase so this will likely have to be done with cash. I would reach out to a lender or local bank to get a plan together.

Design and Planning: Work with an architect to design a project that maximizes the land’s potential. Consider factors like layout, sustainability, and market demand. Obtain necessary permits and approvals from local authorities. Don’t underestimate schedule and budget for this. There are many people involved in the design of a building including architects, engineers, and municipal authorities. Get your architect involved as early as possible - even before the land is purchased…. Are you planning to do your projects in California or elsewhere? I just finished a project in Torrance, CA, and I found that California has a lot of additional requirements related to energy code and seismic design.

Construction: it helps to get a contractor involved early in the design process. The contractor will be your best resource to understand cost of the design; the earlier you identify value engineering opportunities, the cheaper it will cost to incorporate (Google: ‘Macleamy Curve’). You’ll also need to determine your project delivery method (design-bid-build, design-build, etc). During construction, Regular site visits and communication with the construction team will help ensure the project stays on track. Make sure to have a weekly meeting to discuss on-going work, schedule issues, and budget. Make sure the contractor is tracking long lead items to keep the schedule on track.

Feel free to reach out if you have more questions on the architectural process. Good luck!