Developing Commercial Land ( C-4)

3 Replies

Hello fellow investors:
I am a fairly new investor and I am very much interested in commercial properties in Ohio and PA. I am doing preliminary research on a commercial land that I would like to make it into a small mall or a cultural center. I do not know where to start although I guess I could call the city office. However, I am wondering if some of you have done this: developed a land to a commercial property. Does not the city or county provide loans etc if you had a solid plan?
Also, what parties do I need to work with? I know that I have a "market" for what I am thinking but I am not bold enough to buy the land and hold only to pay taxes.
I am also seeking some prospective investors who might be interested in becoming partners.

Thanks

Hello Harri,

Development is in my estimation the toughest part of real estate investing.  There is a lot of moving parts and alot of "snake in the grass" type of risks that inexperienced people get can get bit by.

I think joint venturing with an experienced developer is a tremendous way to get started.  If you can add value i.e. bring additional opportunity its my belief you should be able to break in that way.  E.x. if you already own the land..a joint venture will likely be available.

I highly recommend the urban land institute and a book called "real estate development work book and manual" by Howard Zuckerman as a place to get started.

City and Counties do play but most often with some sort of tax incentive.  I would not start off with that type of project myself.  It is a great idea to touch base with the city planning department and look at what their zonning map for now and the future are.  It helps to have the city on board with your plan...especially early on in your career.

The team you will need might well include:  mentor, attorney, architect,  civil engineer, cpa,  friendly banker, some some equity partners to boot.  A good commercial broker is also key component as well.

“Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.”

George Bernard Shaw

Thanks Doug. The owner just called me again about this "commercial" land and I am not quite ready to make a commitment as there is a lot of homework to be done. The points you make are real and I need to explore this more. This land is in an urban area of a fairly big city but I do not know the statistics and the neighborhood in the area.

You bet!  The most important thing is how to calculate residual land value.  This is basically estimating the return on investment after all the cost of construction and then you'll know whether its a good or bad deal and the most you should pay for the dirt.   Way more important than comparable sales in this context.