Land Development Funds and Private Placements

[Mike Demmitt]

Most investors on bigger pockets are familiar with the large multi-family value add syndication space.  Names such as Joe Fairless, Grant Cardone, and Mark Kenney are familiar to most real estate investors.  I have invested in those types of syndicated deals.  However, I am less familiar with experienced names/operators in land development. 

Who are reputable folks/firms with a solid track record for success and attention to detail?  What are the well known funds or individuals who put together private placements for land development?  Do folks typically invest in funds that are diversified over several development deals? Or do investors usually participate in private placements for single developments?

Are there any tax advantages to investing in real estate development, or any other tax considerations that differ from SFH or multi-family investing?

I'd love to have the answers to this post educate investors like me who want to diversify their portfolio by investing in land development.

[Jay Hinrichs]

I do land development and as @Ian Ippolito states there is a market timing issue and the last 5 years just like just about any Re investment the RE gods have smiled on us.. 

Most of the developers I know myself included ( and again just my small circle) I have never seen any of them put a syndication together to fund these.

Few reasons as stated no cash flow.. returns are FAR higher than most apartment deals by a LONG shot.. so you can attract bigger money players and you don't have to go after that 50 to 100k investor.. you go after that 500k to a couple million or more investor.. and usually only one or two money partners so no need for all the brain drain of a syndication and SEC stuff and risk on the operator side.. Just a Very good LLC with an operating agreement.. The LLC allows for un even distribution so you can limit ownership for bank purposes and allow distributions that as stated make apartment deals pale by comparison.

However if the timing is not right and you have to sit on your dirt you could have cash locked up.. It becomes the age ole risk/return scenario.. However you do pay max tax rate.. and unless you just land bank there Is no way to 1031. 

So from my little world of developing small resi communities  in the 10 to 50 million range..The investor in a Development deal  are looking for known exits when they go in and fairly locked in exit values.. At least the last half decade has proven this to play out.. compared to cash flow were hey we are going to do this and gambling that rents go up and that cap rates stay low and credit will be where it is today and then in 5 to 7 years if everything aligns we exit.

the pros on those of course is tax treatment and income as you hold and pretty much every syndicator out there will take a 100k investment. 

And long term land holds are another animal altogether.. huge upside minimal risk if your in the right MSA but no cash flow..