Which comes first buying the land or making the proforma ?

[LaTara G.]

Hi Bigger Pockets Members,

I have read a few posts, threads, etc. I am trying to get an understanding of the development process for building a duplex, quad etc. I am not sure if I need to concentrate on getting lot/ land first and then starting or if I start making a preliminary budget and analysis before acquiring land. The issue I run into is trying to figure out the costs. I have called around to builders for ranges and cant get ball park prices because they need specifics on land, design and materials. My goal is to build the least expensive possible so I am not picky about the design and materials. ( I would like $60 per square ft or at least in this range)

I have looked online and found a great set of plans with the estimated cost to build in my state at a price I like, but then I wonder if I should hire an architect instead to draft me a plan that would cost what I want to build, do I purchase the study set of the plan I found online and email builders for quotes ? Or do I start with a lumber company for quotes? 

[Rob Harris]

No disrespect intended,,,,, but Spend a lot of money before running numbers???? It's all about the numbers. We must "THINK IN NUMBERS." 

I can reasonably assume you're not an experienced builder or developer. With that, I highly recommend searching out a mentor to help you understand and learn these processes... (Gotta learn the what's and the whys......) ----- This mentor should be someone who has experience in the geographical area your area interested in..... Not every municipality and jurisdiction does things the same,,,,,, most have their own ways of doing things which also carry a cost! 

Good luck!! :-)

[LaTara G.]

I am not insulted. I am seeking general information. No I have not completed a development personally nor have I built a new construction from raw land. I do have experience in other areas of real estate.  If you could possibly answer the question based on your location and experience I would be appreciative. It would be nice to have a general /broad/ basic idea of building 1 house/or 1 residential multifamily structure. The diary of a new construction on bigger pockets was well written and informative however ,I just had the questions above, again thank you for your input.

[Mike Garrett]

Hey @LaTara G.,

I am absolutely biased! Get an architect. New development is complicated. Whether you have stock plan (off the internet for a price) or want them designed doesn't really matter, they have to conform to code. You will need civil engineering to deal with the slopes, drainage and grading of the land; a structural engineer to make sure that it can resist lateral (earthquake and wind) loads; and the architect will make sure that it complies to the local residential building code (as well as coordinate all the other engineers). They can also give you a good idea about construction costs (in Seattle we cant built a home for less than $150/s.f. right now).

Here is what I would do- print out a picture of the floor plan you like, look up 3-4 different architecture firms in your area and call them up (make sure you ask if they do residential, many focus on commercial), make an appointment and bring the floor plan, make a list of questions that you have for them (see list below), take dubious notes and have them all give you a proposal. The key here is to find an architect that you connect with, do not focus only on price. The relationship between you and the architect is more important than the fees, because the value that the architect provides (great relationships with permitting office, competent staff, availability to get started, clarity in communication,etc) is much more valuable than drawings lines on paper. Also remember that you are going to require a bit of hand holding because this is your first time (the architects will know this whether you disclose it or not), but stress that if the team (your development team) can make it a great experience then you plan to build more.

Possible questions

Can you help me find the right property? (many architects help clients find and analyze land)

What kinds of preliminary investigation report do you need to begin design: geotechnical report, wetland biologist report, ALTA survey, title report, etc?

What does the design process look like in your office? (we all have the following phases: schematic design, design development, construction documents- you want to know timelines and deliverables)

Do you engage with contractors to provide preliminary construction estimates to you designs? At what phases? (you want the first one after the schematic phase- granted it is super rough, but you will know if you are in the cost per square foot ballpark)

What process do you usually use to find a contractor for a project like this? (architects call this phase procurement or bidding and negotiation)

What is the biggest value that your firm brings to my project?

Do you currently have the capacity to take on a project like this?

Will you put together a proposal that outlines what you provide in each phase, the deliverables, and the cost per phase as well as a total for the project?

[LaTara G.]

Hi @Mike Garrett this is really helpful thanks so much !!

[Adrian Chu]

Get the under contract with a feasibility contingency and do all your research at that point.

[Josue Vargas]

@LaTara G.,

LISTEN to @Mike Garrett.  He is on the spot!

I would add thought, while many architect firms works independently from Civil Engineers firms focus on land development, many architects and engineering land development firms usually works together (as partnership), if they don't have the other in-house.  

Also depends on what is your budget, engineering services comes in a wide range, from surveying to utilities, roads, easements, to design your properties (architectural, civil, structural, mechanical, electrical, etc), and construction services such as inspections, construction management, QA, etc.  

It will depend greatly on the size of your project and your budget.

[LaTara G.]

@Josue Vargas Thank you for this information it is also helpful !!

[Brent Coombs]

@LaTara G., you might be wise to NOT believe the 'Field of Dreams' whispering: "If you build it, he will come." We don't have the luxury of living in our own Fantasy Land, either.

All that was just to agree with those who say: of course you should know your pro forma numbers FIRST! That is, unless you just want to buy any random piece of land for LESS than its actual value, and FLIP it for profit if your subsequent pro formas don't justify developing it.

But in order to know if you you're buying a bargain, that too requires much prior homework!

And before paying out lots of dollars, you'd BETTER get those pro formas / comps right! My 2c...
 

:

[Josue Vargas]

@Brent Coombs

? I don't want to start an argument here, but LaTara G. was specific in the post.  

I think just the fact @LaTara G. is seeking some advice here its a great step to start exploring alternatives for the sake of "pro forma numbers" and all that, etc in your post.

You may don't have the "luxury of living in your own Fantasy Land", it doesn't mean others can.   Also, anyone CAN pay out lots of dollars, before getting those "pro formas/comps" right, that said, of course is best to be informed before making any real estate investment, as it is applicable for almost any material acquisition in life. 

[Brent Coombs]

@Josue Vargas, ..."of course is best to be informed before making any real estate investment"...

No argument from me!