All Forum Posts by: Prashanth Mahakali

Save the money and don’t do it. Development is the notorious part of real estate which looks really clean on paper and process but is seldom profitable when you need it to be. Invest your money elsewhere and go at it when you have enough money to control a neighborhood and the comps. 
BTW, 100 homes built in 8 years.

The builder will have more control after the project starts. You will have more control before. He gets terms for his build portion and you have to put up actual funds. All in all, this could get ugly if something doesn't go right. Rather find a partner who will contribute same as you and you hire a GC strictly to perform the work. Actual and sweat equity is never equal. It only works if you are owner and GC yourself. Good luck!

Hello @Nilusha Jayasinghe  

From reading the above, the only option for you to go through this process is if you acquire the building and legalized everything about the basement unit. It looks like you want to make this work. In this case, you should have an Architect / GC visit the space and tell you what it would take to make the basement "legal". Given that anyone can be sued for a variety of reasons, I agree with some of the above posts that it is a risk. The way to mitigate this risk is by getting a permit to legalize the unit(which may be a bit more difficult) or duplex the unit with digging down the basement to be in compliance with zoning and building codes. 

It looks like you need this information so you can use it to negotiate down the price even further during the attorney review period. The sellers may not agree but they will know that you are a savvy buyer and they will have this problem to deal with. 

Legal liability is a tough road to go down since it has too many variables for you to deal with. Rather, think about legalizing the space will ensure your property value goes up and grows. You can be that buyer that is willing to take on this project provided you are able to negotiate down the price accordingly. Also, ask for an extension of the attorney review period.  Hope all of this helps. Good luck!

Thank you, @Mark Ainley. Always appreciate the mentions! 

@Rob Blumenstein I hear your pain about finding the right Architect / Builder team. It is something a lot of people in the industry are frustrated about. The '$/sf'  phenomenon is probably the next frustration. It is usually a way for selling one into or out of a job. 

From reading your post, it looks like you have a team already. So the more diligence you are able to do the better. It also looks like you are a few jobs away from GC'ing projects yourself. So I would definitely treat the first few projects as a "Shadow-GC". 

Next, if your aim is to do development, I think its very important to start off with a vision. Why are you getting into development? What will be your market advantage or differentiator? I am in the development world and our pitch is "a dream team of Architect & builder" building quality homes. So we stand out a bit in the market. The work should really shine since its what everyone is going to judge you with. We set out 8 years ago to do only new construction residential projects. So we were able to avoid the pitfalls of taking every rehab project that came our way. This has cost us some great deals but we stuck to the vision. We are now about to hit our 100th home this year! So think about what is unique about your team and really make sure everyone is aligned with that vision and your team. Start interviewing GC's at their job sites instead of a coffee shop. Look at their job site cleanliness and observe other things to make your decision about them. Architects are a difficult bunch! I have tried to bring a sense of pragmatism to accepting projects. They need to make financial sense or there is no project to begin with. 

With your development idea, start the discussion with a lender since they will have ultimate control. If you are doing it with all cash, I would not disclose that to anyone and still use a lender. In most cases, having a trusted lender protects the project from going sideways. Second, reach out to an Architect who is familiar with the location that you are planning to build at and get their recommendations for GCs. Its best if the architect and GC have a prior working relationship so it will make your life easier.

I could do a whole session on this but hopefully this gives you and others who read this some ideas to start with. Happy to chat further and all the best! 

@Jonathan Klemm thank you. Very interesting conversation! As an Architect and Developer myself, I see AI as a tool to make better and faster decisions.

You can’t chatGpT your way out of everything but it could help to know the tools. Whenever there is a technology that seems to scare people out of their livelihood, history has taught us that progress will accelerate and people will adapt. Architects are no different. Good luck to us all!

@Danny Polanski Thank you! 

@Wick Ra Congrats on the purchase. There are two ways of getting a basement unit legalized. If the property is within the ADU pilot areas, you can search for city of Chicago's adu program, complete the online form and wait if you get the approval. Upon getting the approval, you can contact an architect to help go through the design and permit process. Remember that even though the existing basement work is already complete (perhaps without a permit) you may have the architect evaluate the layout and show the changes in the drawings so the unit will be compliant.

If its not part of the ADU pilot areas, your best bet is through a zoning change AND a zoning variation, for which you would need a zoning attorney AND an Architect. There are many architects that you can find through the chicagocityscape website that specialize in ADU permits. I am one of them but you always want to talk to more than one architect before you select one.

Hope this information help. Good luck! 

@Jonathan Klemm thank you.

@Anthony Mei. Lot of people have chimed in. The summary is, although RS3 zoning is primarily for single family homes due to the code restrictions, when the building already has a second unit established legally, it’s grandfathered in.

Your address is unique since it’s in a special district called “Predominance of the block”( 606) district”. This was created to encourage multi unit construction and slow down spec single family home construction. It also imposes a steep fee for demolishing an existing structure.

While the impact is debatable, if you are considering any address in this district, chances are you will be allowed to establish a second unit by right”. In fact, the only way you can establish a single family home is if there are more single family homes than multi units on the same side of the subject lot.

As you can see, all of this could get pretty confusing fast. I can tell that this property owner went through some zoning process based on the chicago zoning map.

Hope this helps.

www.chicagocityscape.com

Thank you @Jonathan Klemm

It is natural to think of code requirement. I have always maintained that for basement or garden units, the goal is to exceed building code. Code will allow glass block windows in rooms that do not require natural light and ventilation. Where required, while it is possible to meet light and ventilation, chances are, you will not meet them without a significant number of openings. It may not make sense.  

If you want a story, I have heard from a client in Chicago how they saw their adult son stuck on the wrong side of a regular vinyl window in a basement not able to escape a fire and lose his life. Basement windows are serious and code requirement is only the starting point. 

Since we are in the topic of garden units, many investors / landlords want to convert their basement into garden units. Having lived in a basement myself, I can say with authority that there is a negative mental / emotional impact living in a basement unit vs an above grade unit. So, if you are going to create one, make it better or as good as the units above. There is a reason most problem tenants originate in the garden units. Try staying in a room that has a 6'-8" or 7' ceiling height for an hour. If you are going to create a unit anyway, make them taller by digging down and create more window openings, with regular windows. Do not obstruct with grills outside the windows. Seen too many of those in the name of "security". Do a little bit more than code requirement. 

Having worked on many basement projects in less affluent areas, I have fought many battles with clients to make these spaces better. Some I won and others I consider I lost. 

I want to end with a positive note. There are ways to make windows taller in basement units. You could expand them toward the first floor and stop the first floor joists short with a beam. You could expand the windows down toward grade with a window well(with a drain, of course). The possibilities are only limited by your creativity and budget.

Happy Friday! 

@Anthony Mei  tough question to answer without getting more details. You should definitely talk to a good lender if that is how you are going to fund the construction. Then find out if the development would appraise for the value needed by the bank. Once you cross that hurdle, you are clear to continue your due diligence. Assume cost of construction is between $160- $170/sf as a good starting point for your initial numbers. See if it makes sense. 

Hope this helps. Thank you @Henry Lazerow