Understanding Land Entitlement and Ground Up Construction Process

Understanding Land Entitlement and Ground Up Construction Process

George Ansong – GAV Capital Partners LLC.,

There are so many niches in real estate investment – like Buy-Fix- Flip, The BRRRR Method etc. (Buy, Rehab, Rent, Refinance, Repeat)

One of the niches that is hardly mentioned is Land Entitlement (Lot Development).

Land Entitlement is the legal process by which a developer or landowner gains all necessary approvals for a real estate development plan. And if you are navigated entitling land, or you are working through a project in a new municipality the process can be daunting.

However, there is a lot of money to be made in ground up development. What are the processes in land development: Here are the processes.

1. Analysis of the designated area as far as the proper use and land acquisition’
2. Know the zoning information to conform to the land use – if not you might rezone and it might take a longer time
3. Proper analysis of comps in the area
4. Preparing to fund the soft cost from your own resources – Survey. Architectural drawings, Engineering Report, Land Disturbance Permit (LDP), Building Permit, - soft cost has to come from your pocket before the construction loan
5. If you are building the bank or the private lender will fund the Hard Cost – the actual construction cost – Foundation, Sheetrock, Windows, Roofing, Plumbing, Electrical, HVAC,
6. Horizontal Cost = Infrastructure cost – road works, tap into city water and sewage, install electricity etc.,
7. Vertical Cost – Actual construction cost – The Actual building Cost
8. Financing – Understanding the draw system – As an investor you have to fund most of the deals from your own pocket in order to be reimbursed. NOTE: Real Estate is very capital intensive – you need to fund the soft cost and the initial construction cost like lot clearance, and foundation before you put in a draw request. Lender will inspect the work completed before issuing the draw request.
9. Final City Inspection before issuing a CO – Certificate of Occupancy
10. Time to Market- Advertise – Promote and Stage
11. There will be a lot of challenges and problems – In real estate all problems can be solved by money and paper work (documents)
12. Sell the property – receive your funds and repeat the system – NOTE – You make money by rinsing and repeating the system.