Land development in Mapleton/springville

[Kyler Berry]

How much is typical price to pay someone to develop land? My uncle has an offer he pays all development fees and then gives the guy who engineers it all 33% gross cut. Is that excessive? he pays the million for all construction costs. he takes home 67%.

[Ryan Konen]

The typical price for land development varies widely depending on the scope of the project, the location, and the type of development (residential, commercial, etc.). However, when it comes to compensating a developer or engineer, a 33% cut of the gross revenue can be seen as on the higher end, though not necessarily excessive depending on the specifics of the deal.

Here’s a breakdown of what to consider:

### 1. **Standard Compensation Models**

- **Flat Fee**: Engineers and developers are often paid a flat fee for their services. This can range from a few thousand to several hundred thousand dollars, depending on the complexity and size of the project.

- **Percentage of Profit**: Some developers or engineers might be compensated with a percentage of the project's profit or the gross revenue, typically ranging from 10% to 30%.

- **Equity Stake**: In certain cases, a developer might receive equity in the project (such as a portion of the profits), which might be higher if they are taking on more risk or responsibility.

### 2. **33% of Gross Revenue**

- This is on the higher end of compensation for land development. It would typically be negotiated in cases where the developer or engineer is adding significant value through their expertise, connections, or risk management.

- If your uncle is providing all of the funding and handling the construction costs, the 33% share to the engineer might reflect a major role in the development process, such as managing zoning, permitting, or complex site engineering.

### 3. **Risk and Reward**

- If the engineer or developer is assuming some risk (such as project financing, delays, or cost overruns), their higher percentage may be justified.

- If they’re only doing the engineering or planning with no investment or risk, then a 33% share of the gross revenue might be on the high side, and 10-20% might be more typical.

### 4. **Comparing Local Norms**

- The compensation structure can vary greatly by region and the specifics of the land development project. It’s a good idea to review local real estate development compensation norms or even consult with a lawyer to ensure the deal is fair.

In your uncle’s case, the terms seem fairly favorable to the engineer if he is only handling the development and not contributing any capital. However, if the engineer is assuming a larger role (for example, project management, approvals, etc.), the 33% could be justified.