starting my first land developing project

[Jeff Yang]

I sent offer to one property that was on market for more than two years.

That property listed for $200k,one year later ,lowered to $150k.

right now is $84k.

I wrote an offer at $50k.

We reached on $65k.

The house is 113 yrs old,needs be torn down.

But the lot is 1.23 acres.

I called the county zoning office,was told that I can build 7 houses on this land.

I showed this property to an contractor,

he loves it,we are going to partner up.

The cost to build one SF house is about $120k,after built,the house can be sold for around $240k.

Totally cost will be $905k.

After built ,the value will be $1.68 M.

My plan is to refinance these houses,cash out $775k.

Then hold these houses for rent to own.

for the seven houses ,the monthly positive cash flow will be around $6k.

I am going to partner up with the contractor.

We borrow money from hard money lender,after refinance,pay off the lender.

I am working on this project now.

so far everything looks optimistic.

any advice will be appreciated.

[J Scott]

Originally posted by Jeff Yang:

J,

I really appreciate your advice.

Could you give more details about the due diligence that I should do?

Here's where I would start:

- First, determine how many houses you can actually build on that land. This will involve sitting down with a civil engineer to examine the plot and determine how to most efficiently subdivide the land and design the subdivision. You may find that you can't get as many houses on there as you think. The engineer can also help you analyze utility layout and other factors that will contribute to the potential complexity of building.

- Then, talk with the county (zoning, stormwater management, permitting, etc) to verify that what your engineer thinks you can do will actually be allowed. You may find that the county doesn't want you to build what you want to build or may require you to get approvals/variances that could take a long time.

- Then, find an architect who can help you come up with ideas on what to build to best utilize the land and create a nice "flow".

- Then, find a new home builder (or a GC with new home construction experience) to come in and help you ballpark estimates on construction costs. You may find that building is a lot more expensive than you thought.

- Then, find a real estate agent who has experience in new construction in the area to give you an idea of what your particular houses (based on the design the subdivision and the architecture of the house) can resell for.

- Then, run your analysis and see if the numbers work...