Partnership Agreement with Developer

[Nigel Liao]

Hi all,

I'm currently considering a real estate deal: It is a piece of vacant land in an up and coming area for around 10,000 sqft. The land is valued at around $100k, and is zoned residential. I have clarified with the city could split the land into two equal sized lots, of which it is possible to build a fourplex on each lot. Other uses e.g. commercial/mixed-use is possible (subject to application and approval).

Given the possibilities and the appreciation that I foresee, I think it would be a good opportunity to purchase the land. However I only have limited capital right now to finance the land purchase, and not the development costs. I also have no prior experience in building developments etc, besides just reading a ton of information online.

Thus, I'm hoping to get some advice on the best way to proceed, given that some people that I talked to have differing opinions. 

• Given my limited experience, is it best to seek partnership with an experienced developer to proceed? Is it possible that I bring forward the deal (the land, the zoning application/approval etc), and the developer supplies the building costs and completes the construction? If so, how can such a deal be structured? I am flexible and open to suggestions.
• Should I supply capital? I do not have spare cash lying around but might be able to be approved for a construction loan. How do the profit splits differ, assuming I now provide part or all of the building capital? Given the holding costs from interest rates etc, is it typically worth it that I do that?
• Typically, would developers want to instantly sell the property after construction is completed, or are they open to holding on for a couple of years? The cash flow would be pretty decent and appreciation is quite solid.

A new fourplex in the city would cost around $400k depending on finishes; however the appreciation has been very strong and prices have risen by ~15% annually for the past 3 years and is foreseen to rise for the next few years (though by a bit less). Current rents are around $1k per unit where tenants pay their utilities.

I very much appreciate your time and feedback. Thanks!