All Forum Posts by: Taylor Bennett

Hey @Taylor Bennett I haven't personally done it, but there's a channel on YT where one of the videos is a case study on this. The channel's name is Commercial Property Advisors - good luck! 

There's no technical definition I'm aware of, it's generally a sliding scale. For this lot, we did all the environmental studies, grading plans, fire approvals, and landscaping plans, along with a preliminary architectural design since it helps with the sale if the buyer can "see" themselves living in the property. A blank piece of land with no house design is generally too much to grok for people.

We didn't do any actual grading to the lot this time. We had planned to grade it and create a pad which would have generated a lot more value, but with the changing market, we wanted to minimize our exposure.

Purchase price (off market): $595k

Improvements cost: $76k

Seller note interest paid: $53k

Property taxes paid: $11k

Total cost basis: $735k

Selling price (in escrow): $1.2M

Gross profit: $465k

I'm very much an amateur and if I was doing it for real I could probably move a bit faster and save quite a bit of money on the improvements - I used an overpriced civil engineer who I won't use again. I don't think I could turn this into 6 months but probably 2 years rather than 3. I was just talking to my land broker about another deal and he was saying it would be similar, $200-300k outflow and 2-3 years. Again this is in coastal CA which is really tough to develop in so YMMV.

I've done a few small scale land improvement deals. Currently in escrow selling a parcel I improved. Two things I've learned about land.

First, it's a very long play, at least in CA. This one took me 3 years. I know that's normal because there's a neighboring parcel being developed by a very well known professional builder and he's at the same stage as me. Unless you can get special treatment through low income or high density development, it's a snails pace due to all the approvals needed.

Second, financing is very difficult. It's typically all cash or hard money. Different than MF development where you can get a construction loan based on future leased values.

These things work for me because I have a day job with W-2 income, so I typically do everything with cash, and I'm not in a hurry to make a profit. My uncle does spec home building for a living and it's a very tough business as Eliott said.

Hello @Taylor Bennett - Unfortunately, it depends!  If the units are that need to be rehabbed can be done without disturbing the other units, then I would rent them out and start to get cash flow.  At least have them on the market if it takes a little bit to get them occupied.  Some of the things to consider are if the utilities are not separated or if parking will be an issue between the tenants and the contractors.

Another thought to consider... what if a future tenant does not take care of a unit and you need to do some significant work then?

Would you wait until all renovations are completed and try to match highest rents?  You do not have to sign a 12 month lease from the start.  All of my leases end in July/August no matter when the first month of occupancy is.