All Forum Posts by: Corey Williams

One week - four weeks, wow! I don't know what I would do if I had to wait for results.

I took the test in Indiana last week, on Saturday, 9/13 to be exact and they gave us our results before we even left the testing center. I passed!!

If you default they need to come after you for something. If you spend 1-2 million dollars on buying the land, rezoning it and designing it then you try and market the project to pre-sell some units only to find out no one is interested. You may be forced to abandon the project and if you have no money, the bank will come after you for everthing to recoup their 1-2 million dollars that you spent and have nothing to show for it. I am not saying you would walk away but as a new developer they don't see your track record to know you will finish the job. I see that you are from Indianapolis. You can go to the IBJ.com website and search for Premiere Properties and Charter Homes. These two developers are fresh on every bankers minds in this market and it would be very wise of you put a solid business plan together that would answer all of the banks questions. You asked a vague question and got a vague answer. The fact is, a lender for a development project wants to know how you intend to spend every penny they give you from land purchase to selling your last unit. Here is a list of items to consider and most if not all of these items cost money:

Land cost, zoning, city planning, due diligence items, civil engineering cost, architectural cost, marketing, attorney fees, construction cost and interest (carrying costs) on the loan.

Don't get me wrong, there is a big reward at the end of the day if you do this right, and many people do. So take your time and learn. Right now I work for a developer and some day soon I will develop on my own, but right now I am not financially ready.

As you can read all over the place, financing is getting tougher to come by and there are certainly no exceptions for new development. There is a lot that goes into financing a development project and most of the details depend on the complexity of your project. First task is to find out which lenders are actively lending for new development, it could be a bank or a private lender. In Indiana banks are proud to advertise by placing a sign on a new construction site that says "Another Project Funded By...". Maybe you could talk to the developer of these projects to learn from them or contact the bank directly if you are comfortable with that. I would advise learning as much of the lending terms as possible before contacting them as you only get one chance to make a first impression, and you will be asking for a lot of money.

Now, you are asking a bank to lend you money for a project that needs to produce income when you are all said and done. Some want to know all of the details that it takes to get the land from where it is today to where it will be when it is producing income, and you may find some willing to lend with very little information. Just be cautious.

Items a lender may ask for include the following: Your business plan with highlights about the market and need for your project, Proforma showing your land cost and construction costs with your projected income, ALTA/ACSM Title Survey, Title Committment, Phase One Environmental Site Assessment, Geotechnical Report and Construction Plans. Some will want to know who the engineer/architect is or who you are going to use as a contractor. All of this detail is so that they can determine their own risk vs. reward for the project.

Like I said all of this information depends on the complexity of your project and the requirements of your lender. An 6-10 unit, one building project may not require all that a 9 building 220-unit apartment complex would, but I have tried to list the big ticket items and it would be a good idea to familiarize yourself with some of these items then determine from local sources if they are required.

The best advise I can give is to contact the utilities engineering department directly.

In my experience some utility companies do a 2 to 3 year assessment of how much power the new building will use. If the cost to bring the utilities to the site is less than the revenue they will collect then there is no cost to you. It also depends on how far they have to run the main to your site.

Most will bring power and phone to the property line and ask that you provide an uninteruppted rout to the meter. By uninterrupted I mean that if the line goes under new pavement they will ask you to install a pvc conduit under the pavement so they can pull their wire through it rather than tear up the pavement. So that pipe would be a cost to you.

Like I said in the beginning contact the local utilty and try to get connected to the engineering department. You may need to find that phone number on their website because getting through the customer service number is a pain in the rear.

Whether you find one lot or 10 lots to turn into one, the process is still the same. The only difference is dealing with one owner or multiple, and sometimes that can be more difficult that the Planning and Zoning process.

Once you find a site you like there is a lot of research you can do before getting the lots under contract, unless there is competition in the area for the same land then you may want to consider getting purchase agreements prepared to tie up the land.

You can contact the local planning & zoning office to find out the current zoning and also discuss your thoughts to see if they will support your plan. The P&Z staff makes recommendations to the Plan Commission, City Council or Zoning Board, whichever group votes on zoning in your area.

The Planner can outline the zoning process as well as the approval process to follow that gets your construction plans approved. That process will likely involve review of site plans, utility plans, grading plans, erosion control plans and storm water plans, etc.

I tried to be somewhat general because different cities do some things differently. Your goals are similar to ours with new construction and and the need to rezone and obtain planning approvals is similar all over the country. The difference is what they require of you (the developer) to get there.

Good Luck! and let me know if you have other questions.

Asking where to begin is a loaded question. I will start by breaking down the general areas of development; Residential, Office, Industrial and Retail. I am sure you can drive around town and see each of these types and the size of a development will range from one building to many many buildings. From this you will see that you can start anywhere depending on the cash you have and the ability to get financing for a deal.

From there each area gets broken down. Residential would be multi-family or single family homes in a subdivision. Retail types include neighborhood centers, regional centers, or lifestyle centers. Each of these centers could have small shop tenants, jr. anchors and anchors. Office could be small one story office condo park or a 3 to 10 story building or downtown skyscraper. Industrial developments typically include bulk warehouse and light manufacturing business parks.

Much like goals for residential being "buy and hold" or "fix and flip"; you need to determine your goals. Are you going to hold them or sell them off to a property management company or a REIT.

You mentioned an "awsome team" is needed. The professionals needed for development include lawyers, engineers including civil, geotechnical, environmental, and traffic, architects, title companies and surveyor.

I may be telling you what you already know and I could go on and on but it would be easier to discuss one or two areas rather than explain all of them. If you have any specific questions I would be more than happy to answer them.

I have never used a surveyor to do my soil testing. I would advise hiring a local geotechnical engineer to take the soil samples and do the testing. They typically have soil scientists in-house that can analyze the soil for you and provide you with a detailed report of the conditions and give you recommendations on how to prepare the soil for construction. Since you mentioned that there is no sewer or water, they can inform you on septic performance. Right now I am paying about $6000 to $8000 to have 20 soil borings taken to a depth of 20 feet.

The permit fees you are asking about are relatively cheap. Usually a few hundred dollars takes care of it. It is the cost of preparing the plans that gets pricey. A wetland delineation is a site visit by an Environmental Engineer who looks for standing water, plant life subject to the standing water, and soil conditions that hold water. It is actually a little more involved than that sounded but you should get the point. They will mark these wetland areas (if they exist) and are you are required to avoid them or obtain a permit to impact them. If wetlands are involved the process can get pretty time consuming, and costly but with your 3 - 15 acre lots you may be able to avoid impacting them which will save you a lot of time and money.

I hope this isn't too confusing. It is difficult to speculate all that you might run into. I investigate new developments every day and it comes pretty easy to me but without knowing the site it is not easy to comment.

I am not going but I know a few people who are. Indiana has 24 connections with the games this year. Either born and rasied or trained here in the Hoosier State. Perhaps in 2012 or 2016 my daughter will be diving in London or ?. The 2016 games will be selected next year.

Now I need to get my butt in gear and start investing so that I can fund the training.

Thanks for the comments and I can see now why a newbie would fail at investment. I mow and fertilize the lawn, fix the squeaky door, clean the carpets, paint and maintain the house all without a lot of regard for the time and money I am spending because I live there. Therefore, my only expense is assumed to be the monthly mortgage, taxes & insurance payment. Without the knowledge I have gained from spending hours on this site I would have assumed Rent minus Mortgage, taxes, insurance equals cash flow. Of course I realize there would have been the occasional repair and vacancy but I would not have budgeted for it via a 50% factor.

As far as the advice on the refi goes, the numbers I quoted are based on a refi that I am going through right now and I will be closing very soon.

Thanks again for giving me a place to work through these thoughts.

I have been reading as many posts as possible in the past week and wanted to run this by you. I have read a couple posts that mention getting started by buying a new home and keeping your existing as a rental. Bingo, you now own multiple properties and you have dipped your toe into the water to see if you can handle it. I am fine with all of that, but my concern is the 50% rule that I have been reading about.

I would get $1200 per month in rent and our monthly P&I is $797. That leaves less than 50% for expenses, which I have read to include; taxes, insurance, repairs, vacancies etc. Would this factor alone make this a dead deal or do you have a more detailed proforma/speadsheet that you would use after investigating any and all of the taxes, insurance and potential maintenance problems to get a final number?

I ask because the house is 8 years old and in very good condition, and after living in it for 3 years I can't see the need for any major replacement of anything. I know I'm foolish to think nothing will breakdown, but humor me for a minute. Does your 50% rule assume the worst case scenario or that the tenant is going to damage appliances or put their fist through a wall. I am totally on board with analyzing a deal using 50% at first, but I tend to get very detailed in my analysis, especially being my first potential rental.