5-Home Single-Family Development

[Joshua Stewart]

Hi BP investors, I've got a potential development opportunity and I would love if some of you experienced developers wanted to weigh in on my strategy ideas with your feedback.

Here are the basics:

• Project is in North Carolina, outside Charlotte.
• 14+ acres. With zoning regulations, setbacks, floodplain, etc we are looking at 5 individual home sites, two acres each.
• Current land owner is giving me until the end of April to put financing together before he lists it on MLS. Looking at $160k +/- for the land itself.
• Looking to build each home at 2600 sqft +/- @ $150/sqft = $390,000 per home (construction cost only)
• I am a residential designer, so I will be doing all of the design work along with my engineer.
• I am close to get my contractor's license and would plan to be the GC for this project. If I cannot obtain license in time I would use one of my GC's and adjust price accordingly.
• Target sale price = $600-700,000 per home

My thought is to find an investor partner - or a consortium of investor partners - to fund the land acquisition and infrastructure costs. I would design a home for each site (five unique but similar homes, not five cookie cutters or copies), line up my construction pricing and then market each home for sale pre-construction. That would allow me to only need to finance the land and site development, with the buyer funding construction and my profits/return coming on the back end.

My marketing would involve a website with comprehensive information on the development and each home, as well as possibly hosting one or more open houses in my office's conference room to show video presentations, models and answer questions, etc.

Good idea? Terrible idea? Idea needs work?

Thanks in advance for any feedback!

[Greg Dickerson]

@Joshua Stewart I have a couple of thoughts for you.

I would not close on the land until you get all the entitlements. 

What is your projected development cost? You want to make sure you are not into the finished lots for more than 25-28% of the total sales price of the house. Less would be better.

You will need to actually build the houses on spec to sell them. Proposed construction listings or air houses as they are sometimes called are very difficult to sell in most markets unless you are in a super hot area. Also presales are basically custom so you need to be very careful and make sure to get a big non-refundable deposit as a buyer may make selections and the deal falls through you are stuck with their choices. I always wait until th house is complete to put it on the market.

I would definitely hire a GC to do the build so you can focus on design, sales and getting the next project. You will likely lose money doing it yourself given the learning curve and the current climate in the construction world right now. You need a GC that does this level of house at high volume as they will save you time and money in the long run.