Land Development

Ben Glaser · 2023-09-25T14:57:13-07:00

I recently came across a property that was pre-platted. I thought I could do an easy flip to a builder, but it got overly complicated and I ended up backing out. Mostly due to issues with the land itself and the high development costs.But it got me thinking that there is opportunity in undeveloped land. Builders need land, many of the large home builders near me would rather buy lots than large parcels of undeveloped land.I've identified 3 great spots. I've done some preliminary research. Based on some other developments I know what builders are paying for raw land, lots, and how many lots they are getting on average per acre. I've also talked to a few of the excavation companies and have a rough idea of what the sitework would cost.NOW - I reached out to 2 of the owners. Both are somewhat interested, but not motivated. I'm sure I can get one of them to accept a contract from me for the right price.But there are a lot of unknowns, since I've never done this.1) What is the time line for a project like this?2) How do developers ride out these costs over a long development period?3) Should I try to partner with an excavation company?4) Do banks ever take a carried interest in a project like this?I'm sure there are 101 other questions I could ask, but I don't even know where to start. I need to be able to figure out all the details before I end up asking for investors etc.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

2y

to answer your questions in order

Time line is dependent on the jurisdiction. from 1 year to 5 years or more depending.

they pay cash for the dirt and sometimes get a 50% loan but most of the time its 100% equity IE cash

U might get an excavation company to partner but going to be pretty rare for a beginner.

banks do not partner at least from what I have seen over the last 20 years back in the 80s this was common for banks. Private Lenders will do participation mortgages I have done a handful for borrowers.

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Kristi KandelPro Member

Developer · Fort Myers Beach, FL · Member since 2018 · 383 posts · 195 votes

2y

@Ben Glaser I've been a developer nationwide for the past 17 years. Feel free to shoot me a DM and we can connect!

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Zach Matson

Developer · Boise, ID · Member since 2023 · 68 posts · 38 votes

2y

Good for you for seeing an opportunity! We need more people to consider land.

An answer to your questions, then a few comments.
1. In my area it's 1 year to get entitled, 1 year to put in infrastructure and get the plat approved, then 1 year to build and sell. Those can vary slightly but good rule of thumb.
2. Developers typically buy the raw land in cash, then get construction loans for the hard costs.
3. This may be hard as a newbie, and excavation companies are mostly just going to want to get their check and move on.
4. Doubtful

The best strategy as a new person that's never done land is find raw land with that development potential, get it under contract with a long close (12 months or upon entitlement). Get the seller to agree to allow you to go through entitlements before closing. You'll spend some money to get it entitled, but then you'll likely double your money or better if you have the right deal. You could even potentially flip that contract as it's not super easy to get a contract that a seller is willing to wait through that entitlement phase.

With very little money out of pocket you can get it under contract with an extended close, then have a site plan drawn up, and sell that contract as a wholesale deal to a developer that can actually close and develop the land. This will basically cost you some earnest money and 5-10k to have a professional site plan made. The key in this market is to have the best land deal for a developer to buy, as, at least in my market, those deals have slowed down significantly.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

2y

Quote from @Zach Matson:

Good for you for seeing an opportunity! We need more people to consider land.

An answer to your questions, then a few comments.
1. In my area it's 1 year to get entitled, 1 year to put in infrastructure and get the plat approved, then 1 year to build and sell. Those can vary slightly but good rule of thumb.
2. Developers typically buy the raw land in cash, then get construction loans for the hard costs.
3. This may be hard as a newbie, and excavation companies are mostly just going to want to get their check and move on.
4. Doubtful

The best strategy as a new person that's never done land is find raw land with that development potential, get it under contract with a long close (12 months or upon entitlement). Get the seller to agree to allow you to go through entitlements before closing. You'll spend some money to get it entitled, but then you'll likely double your money or better if you have the right deal. You could even potentially flip that contract as it's not super easy to get a contract that a seller is willing to wait through that entitlement phase.

With very little money out of pocket you can get it under contract with an extended close, then have a site plan drawn up, and sell that contract as a wholesale deal to a developer that can actually close and develop the land. This will basically cost you some earnest money and 5-10k to have a professional site plan made. The key in this market is to have the best land deal for a developer to buy, as, at least in my market, those deals have slowed down significantly.

In your market where you state 5 to 10k to get professional site plan.. is that an approved pre liminary plat ?? Or are you just talking about a concept map that shows what can be done but with no approvals or engineering at all ?

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Zach Matson

Developer · Boise, ID · Member since 2023 · 68 posts · 38 votes

2y

Quote from @Jay Hinrichs:

Quote from @Zach Matson:

Good for you for seeing an opportunity! We need more people to consider land.

An answer to your questions, then a few comments.
1. In my area it's 1 year to get entitled, 1 year to put in infrastructure and get the plat approved, then 1 year to build and sell. Those can vary slightly but good rule of thumb.
2. Developers typically buy the raw land in cash, then get construction loans for the hard costs.
3. This may be hard as a newbie, and excavation companies are mostly just going to want to get their check and move on.
4. Doubtful

The best strategy as a new person that's never done land is find raw land with that development potential, get it under contract with a long close (12 months or upon entitlement). Get the seller to agree to allow you to go through entitlements before closing. You'll spend some money to get it entitled, but then you'll likely double your money or better if you have the right deal. You could even potentially flip that contract as it's not super easy to get a contract that a seller is willing to wait through that entitlement phase.

With very little money out of pocket you can get it under contract with an extended close, then have a site plan drawn up, and sell that contract as a wholesale deal to a developer that can actually close and develop the land. This will basically cost you some earnest money and 5-10k to have a professional site plan made. The key in this market is to have the best land deal for a developer to buy, as, at least in my market, those deals have slowed down significantly.

In your market where you state 5 to 10k to get professional site plan.. is that an approved pre liminary plat ?? Or are you just talking about a concept map that shows what can be done but with no approvals or engineering at all ?

Not a preliminary plat, just a concept plan. I've even gotten them for as little as $500, but I did all the leg work first and knew the exact layout I wanted and could do, met with the city, etc.
Engineering is another $15k+ depending on size and difficulty of project(15k for small infill subdivision).
Approvals could be another $50k-$100k or more if hiring an architect to manage the process through entitlements.

But, for someone just wanted to get a concept on paper and flip that land contract, it can be done for not much cost. I've seen a lot of people make multiple six figures on land flips by simply having a concept down on paper that's viable.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

2y

Quote from @Zach Matson:

Quote from @Jay Hinrichs:

Quote from @Zach Matson:

Good for you for seeing an opportunity! We need more people to consider land.

An answer to your questions, then a few comments.
1. In my area it's 1 year to get entitled, 1 year to put in infrastructure and get the plat approved, then 1 year to build and sell. Those can vary slightly but good rule of thumb.
2. Developers typically buy the raw land in cash, then get construction loans for the hard costs.
3. This may be hard as a newbie, and excavation companies are mostly just going to want to get their check and move on.
4. Doubtful

The best strategy as a new person that's never done land is find raw land with that development potential, get it under contract with a long close (12 months or upon entitlement). Get the seller to agree to allow you to go through entitlements before closing. You'll spend some money to get it entitled, but then you'll likely double your money or better if you have the right deal. You could even potentially flip that contract as it's not super easy to get a contract that a seller is willing to wait through that entitlement phase.

With very little money out of pocket you can get it under contract with an extended close, then have a site plan drawn up, and sell that contract as a wholesale deal to a developer that can actually close and develop the land. This will basically cost you some earnest money and 5-10k to have a professional site plan made. The key in this market is to have the best land deal for a developer to buy, as, at least in my market, those deals have slowed down significantly.

In your market where you state 5 to 10k to get professional site plan.. is that an approved pre liminary plat ?? Or are you just talking about a concept map that shows what can be done but with no approvals or engineering at all ?

Not a preliminary plat, just a concept plan. I've even gotten them for as little as $500, but I did all the leg work first and knew the exact layout I wanted and could do, met with the city, etc.
Engineering is another $15k+ depending on size and difficulty of project(15k for small infill subdivision).
Approvals could be another $50k-$100k or more if hiring an architect to manage the process through entitlements.

But, for someone just wanted to get a concept on paper and flip that land contract, it can be done for not much cost. I've seen a lot of people make multiple six figures on land flips by simply having a concept down on paper that's viable.

agreed I have done that a time or two. but I usually had to carry them through to preliminary plat approval with a list of conditions to get the big dollars. Its a niche for sure.. WE dont engage Architects much in this process here in Oregon.. Its land planners and civil engineers for SFR lots.

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Eliyahou Gronstein

Lakewood NJ · Member since 2021 · 45 posts · 16 votes

2y

@Kristi Kandel did you ever develop land in New jersey

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Kristi KandelPro Member

Developer · Fort Myers Beach, FL · Member since 2018 · 383 posts · 195 votes

2y

Quote from @Eliyahou Gronstein:

@Kristi Kandel did you ever develop land in New jersey

Hey Eliyahou, I done smaller projects in the NE. It's all the same process and steps to define the development process and steps in each market. Did you have a specific question?

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