How to evaluate "the deal"

[Demetrios Mustakas]

I have (self)studied real estate for several years but have only recently (last 6 mos) really begun to grasp the cash flow and tax savings aspects of long term real estate assets. I have an example of an opportunity that I am trying to .. navigate.. is the best word I can think of, to see if it could be developed into an actual deal. EX: my good friend's father has a piece of property (40-50 acres) that is not currently developed, just land. I recently found an Urban Redevelopment plan that includes a very large effort to develop the area, VERY CLOSE to where my friends fathers property is. I think there is something here. I lack the background and knowledge to know what questions to ask and what to go find out to see if there is something there. Basically, I need help, advice, I am reading everything I can right now. My areas of interest? Multi-family.

[Michael Ealy]

Originally posted by @Spencer Gray:

I'm not a developer but have assisted in helping individuals get projects developed who don't know where to start.

What does the area need and what is in demand? It might be apartments, it may be retail or office. I would work to put together a study of the highest and best use of the property. Also see how the land is zoned and if it can easily be rezoned if necessary. 

Once you have a general conceptual idea I would reach out to the city/town/zoning board to see what are the steps to get the project fully entitled aka legally allowed to build your development.

At anytime, but especially if the land is entitled, I would reach out to several local developers who have experience in the niche you are pursuing. Find one that you like to work with and is qualified. Pursue a joint venture with a developer where your group provides the land and maybe some capital and the developer provides the expertise and possibly capital as well. 

Hire a real estate attorney early in the process who can assist in navigation and help provide contacts.

This is just one way to approach it but it's how I would.

Best of luck!

In addition to what Spencer said, one thing you can do is network at your local REIA, local chamber of commerce and network online here on BP and seek out several local developers.

To be honest, you don't have the expertise nor the experience to make this work. So, you need to partner up with experienced developers in your area. As you said, you don't even know the questions to ask. 

The experienced developer has the contacts to do the feasibility study to see if this deal makes sense. 

He/she can envision how to make it work better than you can. 

And backed by his/her credibility, raising capital from banks and private investors become a whole lot easier vs. you doing it by yourself.

For example, last Friday, a "newbie" (he is an experienced apartment investor but he has not done a development project before) showed me 3 buildings in downtown Cincinnati owned by a billionaire. The three buildings were just abandoned because the owner does not really need the money and not taking care of them.

The location is topnotch. And at a bargain price of $4 MILLION, I can come up with a plan to make the 3 buildings worth far more than $4M and that's because an experienced developer has the KNOW-HOW and the KNOW-WHO to make a development deal happen.