Rental Property Investor · NC · Member since 2020 · 1 post · 0 votes
Hello everyone!
I have been doing some research on subdivision development and the self-doubt is really getting to me. I would love to hear from the experts. I am so fresh to the scene but I have a vision that I must see through. I am just confused on where to start. Any help is appreciated. Thank you in advance!!
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
3y
The reality is you don't get started with no money. Subdivision is a very lengthy and expensive process depending on the location. Now there may be ways to get started 'easier' and with less money, but no money is very unlikely to happen. If you want to consider the lower cost option, look for areas in town that have larger parcels. Specifically you need to know how big the minimum lot size is, and then find a home that's on a 2X+ lot size. There are other considerations like setback and zoning, but splitting a 2 lot infill is generally fairly straightforward in most areas (CA and major metro cities would be the exceptions).
Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes
3y
I'd recommend putting 110% of your efforts into finding a deal, probably raw land.
As a new investor, you're not going to be able to take down a development BUT you can very easily find someone to take it down for you if you bring them the deal. You'll also be rewarded with a nice finder's fee and maybe even a small percent cut of the final development.
Go out and rub shoulders with land owners - farmers, trusts, local RE meetups, local chamber of commerce, whatever. Find someone interested in selling. Then, find developers, build the right relationship with them, and make their day with an awesome connection to a willing seller.
I have been doing some research on subdivision development and the self-doubt is really getting to me. I would love to hear from the experts. I am so fresh to the scene but I have a vision that I must see through. I am just confused on where to start. Any help is appreciated. Thank you in advance!!
Mai Ling- Your self-doubt is most likely authentic and warranted. The first thing that needs to be done after you've identified a property that you think has development potential is to be able to underwrite and determine its highest and best use. The second thing that needs to be done is to determine if the use you want to develop can be permitted and if so, define the process that gets it entitled along with the time and cost associated with getting it to a shovel-ready project.
If development truly interests you, I strongly suggest that you learn the nomenclature (language) of CRE and ground-up development along with its metrics (measurements of performance) before you spend much time or money chasing a site down.
Send me a DM and I will send you a snapshot of a short but potent pro forma I have created and use for my own preliminary financial analysis of a site.
Development is NOT brain surgery and can be learned if the will and access to quality information needed are there. Getting a site permitted is the 1st step in the development process and can be the most profitable from the standpoint of ROI/ROE and done in the shortest time compared to subsequent steps (construction, leasing/sale, operations). If you have acquired the site properly, the Pemitting process also offers the greatest ability to manage risk. Permitting can easily take a year or two. By identifying the permitting process in terms of timed Milestones, 3rd party consulting costs, permitting fees, and at-risk Earnest Money can and should be measured and controlled. Making closing subject to the receipt of permits and providing termination rights provide the developer with off-ramps to be used if needed.
Please feel free to run any questions you may have about the development process, and I'll be happy to answer them if I can.