What Questions to ask on a Development Proposal?

[Mitchell Hammack]

Hi all!

I've been sent a real estate development proposal by a friend of mine who is looking for me to invest. This would be my first time investing in something like some so I want to make sure I ask the right questions! For some basic info they are proposing a 40-acre land development in Kentucky. They are looking to build a number of SFHs on the site. The first phase they will build 5 homes and expect the completion to take 13-17 weeks. They are highlighting that the developer is vertically integrated as they will be both the contractor and developer. They include a number of local economic data and highlights as well as information about the team. If someone has participated in the process of investing in a proposed development before and could shed some light on how I should approach this that would be great!

Another point to add—They state in the proposal that the investors are contractually guaranteed a 10+% return on the investment. I'm not sure if that is common but it sounds like the developers would not take any profit until the investors hit that mark.