Over the last few weeks or so, I've been speaking with a gentleman who owns a parcel of land in Concord, CA. The parcel is 1.18 acres. Currently, there is a house sitting on the lot that needs to just be torn down. The owner has provided me with plans that he had drawn up 15-20 years ago that were never submitted to the city for review. So, from my eyes there is quite a bit of potential to make something happen here; the only problem is I'm not sure how to maximize the potential from this lead.
The possibilities I see in front of me are:
- Refer the lead to a developer and collect a small fee
- Get the property under contract and wholesale the contract
- Tie up the property for a period of time (either with an Option to Buy or a Purchase Agreement with a lengthy contingency period) and try to get subdivision plans drawn, submitted and approved before selling to a developer
- Somehow buy, subdivide and develop myself
My background thus far in REI is 4 deals - (1 completed flip, 1 wholesale and 2 ongoing flips). If you were in my shoes, what would you do? I think the greatest return would be from going through the entire subdivision approval process and then selling approved plans to a developer; however I have no idea the amount of time or cost required to get that done. Any recommendations from folks who deal in raw land, subdivisions or developments?
And, because I just read the very timely article from @Karen Margrave here are the lot characteristics:
- Average lot sizes in the area are 6,000 - 10,000 sq. ft.
- Infill lot with no views (rest of the area is completely developed)
- Lot is almost completely flat
- Houses in the area are selling for roughly $330/sq. ft.
- Some other lots that have sold in the last year have gone between $115k - $200k
I would first go to the City of Concord Building Division and ask what can be built on the plot of land. Free of charge, they will be able to tell you what you can and cannot do with the land and how do build if you want to go that route. I would also see if there is the proper sewer, water and electricity hook ups as that would be expensive to build out. Finally, your exit method would depend on your time/money commitment. You can buy low and quickly wholesale deal for a quick profit, or if you want to learn about development and the approval process and have a bit of money to put into the project, you can get some plans approved and sell them to a developer. If you want to have more fun, you can then go out and develop the project yourself. Many options to choose from, I don't think there is a wrong answer if you are looking to learn and do something new. I would try my hand at developing the project myself, it sounds like a lot of fun/headache to do!
@Johnson H. thanks for chiming in. I was planning on going down to the Concord Building Department tomorrow to see what they had to say. My hope is that there is already sewer, water and electricity hookups on site as there is an existing house on the lot, but it may not be enough capacity for 4 separate lots.
You are spot on, the exit method is dependant on how much time and money I can devote to this. Honestly, developing the project myself sounds fun/challenging/rewarding but I know I do not have the wherewithal at this stage of my career to undertake such a project. Especially after reading the very informative Diary of a New Construction Project by @J Scott
Any tips for finding developers in the area? I did a cursory Google search last night and all I really found where the large-scale home builders (KB Homes, etc.). I plan on digging in more, but I didn't know if there was an easier way to find out infill lot developers in the Bay.
@Brandon Foken Sounds like an adventure. First off, you'll want to check on the zoning and see what it is. What are minimum lot sizes? If zoning allows smaller lots, and I'm sure it probably does, you may be able to do some type of a joint venture with a local developer. I'm sure land in Concord is hard to come by. If there's been any other homes built on infill lots in the area, that would be a good place to start.
I've also written some blogs and other posts that might help with the thought process
This sounds interesting. Can you send any kind of an information package on the property? We could potentially collaborate with you on determining feasibility and uses if you would be interested in that. Feel free to contact me.
Heritage Management and Development
@Brandon Foken - I don't have any connections over there in the East Bay for new builds. I would talk to local community banks and credit unions to ask about financing construction and then ask for contractor leads for new construction. They will probably be able to ofter you a name or two of some of their better clients that are contractors for new builds.
How did it go at the building department today?
@Johnson H. I have a couple of meetings teed-up in Concord tomorrow so I'll be going by the building department before those so hopefully I'll have more to report back tomorrow. Also meeting with the seller so I'm hoping to get a little more information out of him since he has been pretty tight-lipped thus far. I'll be sure to update the thread when I know more. Thanks!
You should touch base with @Kyle Zaylor regarding development, and potential contacts. He's given me some advice on lot development for a small lot I was looking at, although didn't end up buying..
Infill in Concord should be hot right now, so if you get in at a good price, I don't think you should have issues finding a partner or normal construction financing w/ downpayment, as long as you can get it through the city.
If you want to take it to full buildout, you probably want to partner with someone who really knows the development process out there, and hopefully has drinks with the members of the planning committee lol
@Brandon Foken sounds like an exciting project! As you alluded to in your first post, there are plenty of options to consider. If you haven't started one yet, a scenario analysis pro forma could help in teasing out assumptions to see which ones are the most viable, worth your time, and worth the risk.
@Karen Margrave is right with zoning when speaking with local planning and building folks. Also try to identify any set back info, easements, and unique/specific restrictions when speaking with them. If the seller has an existing site survey and soils report, these should help give you more info on the dirt (and save you some $ if you were to subdivide and/or develop further).
Let's connect offline if you think it'll help--happy to chat anytime.
@Brandon Foken With a parcel that size in Newport Beach, CA they are able to do small "pocket neighborhoods", I'm not sure if Concord will let you do that, etc. They basically are a smalled PUD where they have shared driveway. Not sure how complicated that would be as far as getting all the approvals. We've done it with office buildings before, but never residential.
@Kyle Zaylor caught what I forgot on setbacks, etc. too.
Also, you mentioned that the lot was used for a playground. However; if it ever had a structure on it, you may be able to get some credit for any fees that were paid for utilities or ? though, in your case it seems as though it has probably been vacant forever. Good luck. Keep us posted!
@Johnson H. Finally made it down to the city's planning office today and got some good information. Concord requires a minimum lot size (for SFHs) of 10,000 sq. ft. Since the parcel is 1.11 acres or ~48,000 sq. ft., it may be tough to squeeze 4 separate houses + a driveway into the space. There is already existing sewer hookups, although they were unsure if it has enough capacity for 3 additional houses. I still need to call PG&E and the water district to see what they can tell me about existing utilities there. Timeframe is 3-to-6 months for full approval process, longer if the neighbors want to cause any headaches. Fees are $6,100 + $464 for each additional lot. I got a list of setback requirements and other restrictions as well.
@J. Martin - I like the way you think. I only spoke with the city about subdividing into separate parcels, but the idea of putting a bunch of townhomes in a small PUD is very intriguing. Probably a better use of the land if it can be done.
Thanks everyone for chiming in and helping out thus far. I'll keep updating as I progress. (PS: This is what makes BP awesome).
Go on to Google Earth, and look at 213 Calabria Court, Costa Mesa, CA on street view. Each lot is about .07, but it's a pocket neighborhood. They are detached houses. There's some with fewer homes, and more on the main street there, which is Orange Avenue, in close vicinity to Calabria.
@Brandon Foken Did you decide if you were doing anything with that lot? You might want to go talk to a civil engineer that works the Concord area, and ask them what can be done with a parcel of that size. You trying to track it all down, when you're not experienced is very hard, and someone that knows the local codes, set backs, etc. and understands what is required for PUD's, etc may save a of time and money.
@Karen Margrave sorry for the delayed response. I was taken out of town for a bit to deal with the passing of my grandpa and then the seller went on an extended vacation. He should be back tonight/tomorrow and I'm hoping that we can get back on track. After I speak with him, I should have a better idea if this will be doable or not. Thanks to you and everyone else for chiming in thus far. Hoping this is just the beginning of the process!
Quick update for those following along. I finally got back in touch with the seller and was able to establish a bit of rapport over Lake Shasta of all places. He was extremely resistant to throw out a number, but after a few minutes of talking back and forth, he told me to give him a few days while he ran through some numbers and he'd get back to me with an initial asking price. Once I get that, I'll be able to see if his number is a possibility and it'll really help in my analysis. Hope to have more soon!
Hello @Brandon Foken
Concord, CA or pretty much anywhere in the Bay Area, is a HOT market right now. However if you buy now and work on the project to sell next year, have to consider where the market can be. Considering the inventory right now, in the area it must be an easy sell. However if you have seen Walnutcreek, as you enter Ygnacio valley road, there are numerous developments going on. Most of them looks like apartments for rent.
Is this land something that you can do the same with? As there is market for rental. Are you only looking to Flip. If you get the lot for an "awesome" price, may be you can consider it for build and hold! Just my 2 cents!.
Between if you are looking for partners on the project :), please do ping!.
@Naveen Desai I hadn't thought of putting any rentals on there. Zoning seems to restrict any sort of higher density apartment complexes. Also, and this is as of today, houses are going for about $550-600k ($330 PSF) in the area. I think those two factors are pushing me to only thinking about this as a SFH development, but I'm certainly no expert at all when it comes to this (or any) arena.
@Brandon Foken hey Brandon! Any updates??
Speaking frankly and knowing nothing about your situation, specifically regarding capital, I would try to flip the deal. In MD, you'll spend over 100k engineering the property and getting approvals. I'm inclined to think CA is more expensive.
First mistake IMO was letting the seller come up with what they think it is worth. It will almost always be retail plus. Be ready to counter or walk.
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