How to get into Development Projects?

[Greg P.]

Hello, it seems like there are people still developing in this market. From what I'm hearing they are doing a lot of senior housing and apartments. How does one who has experience in rehabbing houses, but none in development, "break" into this aspect of real estate? I have the cash, but what are the steps to move into starting a project? Any advice would be appreciated. Thanks!

[Joel Owens]

I usually see commercial developers budget for a 4 year project.

After land seller delays,political delays,zoning and site delays,construction and phase funding drying up these projects can take up to 10 years to get the first phase going.

If there are multiple phases you could be looking at up to 20 to 25 years to finish.

Everything constantly changes.The people in local city and county changes.The mayor can change.Budgets from the city and county allotted to development change.Type of project and viability can change etc.

Used to developers just made an LLC with high LTV and put a little coin in on high non-recourse say 90% with 10% down.Maybe 85%,10% down,and 5% mezz debt.

That has all changed.Lenders want recourse and your first born now and cities and counties need monetary assurances they won't be left finishing up a half built project of roads and lighting and the tax payer footing the bill.

They want you to pony up other trophy properties in your portfolio as collateral.This has caused developers to be ultra conservative on what they can pay for land to develop along with projected rents they will get during lease up and completion.