Large Land Development in Suburban Area

[Ronnie Booth]

Hey BP!

I recently locked down a large parcel of land in a suburban area I'm not used to working in. I'm used to doing small 2-4 unit developments, but this is 6-7X that amount and in an area I've never done a project in.  

The Question

How would you move forward on this deal? Would you try and partner with a developer on the project? Is so, would you go ahead and get a concept plan to pitch to the partner or just turn it over to them to figure out? Would you just wholesale it? Again, if so, would you go ahead and get a concept plan to pitch to the partner or just turn it over to them to figure out?

The Land

The parcel is 11.5 acres, however, there is a flood plain that runs through it roughly leaving about 7.5-8 full acres of developable land. The zoning allows for a minimum lot size of 10,000sf. I'm currently working on getting an updated survey to verify the exact amount of land that will be developable. 

The City

I spoke with the city about how their approval process works and, in short, found out they're out of their minds and seem to be trying to make developers lives harder. I was told I needed to submit a conceptual site plan which would take about 1 month to approve through the city. If the city approves the plan you have 2 DAYS to submit your full construction documents. This means that while I'm waiting for approval on a concept plan, I have to spend $25,000+ on construction documents that may end up being irrelevant if the city decides to disapprove my original concept plan. 

The Plan

Originally, my plan was to try and develop the land myself and sell lots to individual developers. However, I've recently become aware that the cost of doing that would far exceed anything I alone could maintain. My second thought was to simply hire an engineer to draw up a concept plan that I could show to a more seasoned developer who may want to do the project themselves. In this case, I would do a funded double closing adding my fee to the price and would likely have submitted the concept plan to the city on their behalf prior to closing. 

The Cost

The quote from the engineer came back over $30,000 for:

1. Concept Plan

1A. Traffic Shed Analysis (If necessary)

2. Preliminary Plat

3. Construction Documents for Entitlement

3A. Stormwater Management – Water Quality & Quantity Detention, etc.

3B. Permitting Assitance, SWPPP, & ARAP Application/Plans

4. Project Coordination and Meetings (Hourly-Not to Exceed)

I have a good due diligence period, but due to engineers/surveyors being backed up in my area I need to get moving. 

Thank you in advance!

-RL

[Ben Raef]

Sounds liked funds are tight.  You can reduce your total investment if you sell paper lots to a land developer/home builder.  In summary you would do the leg work on the front end to ensure the deal is developable and prove  the property profitable to a developer/home builder.  So step on would be to get a home builder/developer on board to take down your lots.  Step two is to get a concept plan/plat approved by the city.  

Every city does their concept plan/plat process differently, however I find it strange that a city would require you to have complete construction documents prior to platting.  Typically studies (traffic, drainage, utilities) are required at the planning stage along with a plat/concept plan but not construction documents.

You may be able to get 14 -16 lots on the deal unless you can reclaim some of the floodplain.  What are these size lots selling for in this area?  What are home builders paying for lots?  Do the numbers work out?  

Also If you want to stay in the deal and make some more money after you sell paper lots you could stay in the deal to manage the design and construction for a fee.

Best of luck to you!

BR