We own a duplex that we're renting out in Southwest Atlanta for the past 2 years. One of the biggest appeals for this purchase was the large lot size, 1.66 acres, and the potential to develop in the future. Well the future has arrived and were starting the research process to discover the possibilities. Land development is new to us and this will be huge undertaking. We've done the land survey and a feasibility study that showed it is zoned MR3 and we could potentially build 24-26 units. But I thought the feasibility study was going to give more helpful information that included financial modeling, like projections for costs, ROI, cash flow, funding options, basically give us an complete idea of this cost undertaking. How and where can I get this type of information? Thanks for any suggestions.
Lender · LA · Member since 2024 · 9 posts · 2 votes
5mo
Would recommend going to a lender on the broker side. Going to one bank may get you multiple options - but they'd only be the options within that bank. Brokers can check with multiple lenders for the project and compare loan terms. But on top of getting your loan terms, they can match underwriting guidelines.
When you move out of the primary residence loan types, it gets more like the wild west with lenders. Some lenders are more lenient on certain aspects, while some may specialize in a specific scenario.
True financial studies depend on the terms of financing as that is one of the largest hits to cash flow once the property is stabilized.
You've got a 2 phase analysis here: construction then stabilization.
Simply put: Construction, you want to make sure what you pay to build does not exceed the value (ideally you want enough equity to exit the construction loan). Then stabilization, you need to make sure you see a tangible benefit from the start of the project to your exit point, whenever that may be.
For my investors, I do these in a spreadsheet I built to have a complete market analysis, pro forma, tax shields, CoC, IRR, etc. and then create a full proposal. But all of those numbers would be based on terms.
Unless you are paying for everything out of pocket without financing, you need the person driving the financing side involved early because they know what an underwriter is going to need along the way.