Land development project - DFW Suburb

[Roland Brown]

Investment Info:

Other other investment.

Purchase price: $700,000
Cash invested: $28,000

Land Development project. Purchased 23 Acres of Farmland, east of Dallas in the suburbs. The plan is to work through the entitlement process, then develop the property in preparation for home builders who have an unquenchable appetite for buildable land right now.

What made you interested in investing in this type of deal?

A longtime friend and mentor has been developing for several years recommended I state developing land. We found this location, ran the comps for what the property could become and were encouraged by the results so to the steps needed to acquire the land. Through the process I have been able to get my questions answered very quickly by having a trusted mentor to check in and get guidance.

How did you find this deal and how did you negotiate it?

Found the deal through MLS, the property had sat on the market for more than 100 days so we proposed a price point that made sense for the numbers we needed to hit. We were able to get the project under contract and ultimately closed on it.

How did you finance this deal?

The project was financed through a local bank who does acquisition and development loans. For the down payment I partnered with a few friend who wanted to be invested in land development to put down the initial down payment.

How did you add value to the deal?

The process of developing land can be separated into 3 sections: entitlement, horizontal development, and vertical development. The entitlement process takes the farm land from agricultural land and gets the city approval for exactly what should be built.
Even if the location is zoned, it needs to go through the cities entitlement process. Horizontal development is adding storm drains, utilities and streets.
Entitlement and Horizontal will add ~$523K of Value

What was the outcome?

We are moving through entitlement right now and actively working with a few home builders to market the property and get a final contract to disposition the property, targeting to sell the property either in April or October.

Lessons learned? Challenges?

Biggest lesson learned so far is to make more use of the feasibility study to get down the road on entitlement.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with First Capital Bank of Texas to get lending, which was very helpful in securing the property.