Commercial Land Development

3 Replies

Okay first let me start by saying that I am very new to this and this is my first post on BP

I am looking to develop a piece of land that is 1.5 Acre in size on the north west side of Houston. There is a CVS is right next to it and the intersection is getting busy everyday. I have one renter already ready (Dental). 

So my question is on a 1.5 acre lot how much rent able space can be built and what is the average cost of commercial construction.

The owner is asking around $1.1MM for land, so what will be best way to go about it to make it a financially viable project. 

Any type can of feedback will be really helpful. 

Thanks

You tie the land up under contract. You get an engineer firm to do a couple of layouts for a site plan. You figure in purchase of the land, legal costs, labor, and materials to arrive at an all in per sq ft. You take out vacancy factor for the area and expected rents per sq ft and CAM to get to your cap rate to cost.

That is your break even. Then you figure out what a resale cap rate would be and that is an estimate of your profit spread before capital gains tax and real estate commissions on resale.

Very quick and basic overview. 

@Rakesh Dusane Have you considered trying to partner with an experienced investor? Not that you can't do it on your own, but it will be tough doing a development deal like that your first time out with no background.

I am interested at similar development of a retail center and occupy a portion of it while leasing out the rest. At what cap rate does a owner occupied new construction makes sense before you start? How long after construction does it take to get it occupied? 

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