Ok, I have a piece of land and an idea in mind... Whats next?

Question

Ok, lets say I have a piece of land in mind that I would like to develop a few mid rise apartments and condos on. What would be the next steps of me acquiring, building and ultimately selling this land?

Claudio Alegre · Answer

So if you put it all together......After following Jons advice which I think should be the initial step, then you should get right into the numbers in general and then specifically, financing availability, investment resources, on a more global aspect how does the project fit into the areas master plan, is the area upcoming or stagnant....then you should flow right into Corey's description of due dilligence....
What I mean by getting into the numbers is basically, does it make money and if it does....how does the return compare to risk and does it have a reasonable time value factor.....Is the project a good investment if I were asking you to invest your money in it?.....

take care.....

Corey Williams · Answer

Very good point Jon.  I have often heard "start with the end in mind."

Tiara Murray · Answer

Great advice Jon. Thank you

Jon Holdman · Answer

Corey's post deals with the issues related to ensuring the land is buildable and what can be built there.

Another set of questions to answer is about buyers and what they will buy.  In some of your other posts you asked about who buys new development, and I gave you a somewhat vague "buyers" answer.  But, as you go into a real deal, you need to figure out who the actual buyers are, what they want, and how much they might pay.  You need to find your competition, and figure out how to distinguish yourself from competitors.

I would argue that's all actually the first step.  Then, once you have an idea of what sort of properties will sell and for what price, you start looking for an appropriate piece of land.

Corey Williams · Answer

Yes, that is exactly what it is.

Tiara Murray · Answer

oh ok, thanks Corey

Tiara Murray · Answer

Would this be similar to Due Diligence?

Corey Williams · Answer

I am going to list a few very general steps that we go through up front while looking at new land.  You may need to ask detailed questions to get the full answers but it could become difficult to walk you through this in a forum like this.

Before we prepare a purchase agreement for the land we do a little investigative work to see if the land is suitable for our needs.
   * are there utilities to the site or nearby?
   * stormwater is a big issue in some areas.  Determine what your detention requirements will be.
   * what is the current zoning of the land and is it an allowable use for apartments and/or condos?
   * what are the permit fees and submittal costs involved with new development and are there any impact fees?
   * generally speaking how much will it cost to build this project?
   * sometimes we talk to the local planning department to make sure they will support the project.

After we do some of the general investigation and determine that we can afford to build our project, we then present a purchase agreement to the owner.  The purchase agreement includes tasks that the owner is to do as well as tasks that we (the buyers) are allowed to do before we close.  And of course, it spells out the price we will pay for the land.

Much like buying a home, there are contingencies that must be acceptable to the buyer before you close.  The purchase agreement should layout a time frame to complete some of these "due diligence" items.

You will need a boundary survey and title commitment to verify there are no liens or encumberances on the property.

You will want to hire a geotechnical engineer to verify the soil is suitable for building an apartment building.

You will need an environmental engineer to make sure there are no contaminants (asbestos, mercury, lead, etc.) on the site, as well as wetlands and/or endagered speices.

If you need to rezone the property we may want to consult an attorney and/or civil engineer to help with that.

Depending on how many units you intend to build the city may require a traffic study be completed to determine the impacts to the streets and intersections.

This is typically how we start a new site and it is a very general list of items.  These are typical of most sites and there could be more, but we can start here, because I don't know alot about the area you are looking in.