I am currently looking to acquire 2.5 acres of land for development in a rural area in North Carolina. This would be my first undertaking. The land is in a usda defined rural area and zoned for residential development. The land was scheduled to be phase two of and already 30 existing town home development that the 2.5 acres is next to. It is my intent to build 20 to 30 town homes. The seller seems motivated. I am unsure as to why he decided not to move forward with phase two of development. To finance project I am looking towards usda and possible private money. I am currently getting all of my ducks in a row and as a newbie would like guidance on what steps to make.
Before we get into the developement part, lets back up a second and examine the deal.
My first question is why is the seller selling? Secondly is there a market for the houses? How long did it the seller to sell all of the phase one houses. and how does that affect your carrying costs.
I hope that helps
@Terrance Merck Ask the developer why he's not developing it, that's usually the best way to get an accurate answer.
What is the demand for houses? In the development next door, are they mainly owner/users, investor owned and renters in them or what?
What are the costs associated with the development? Infrastructure such as curb, gutter, sidewalk, electric, gas, putting in roads, and getting everything to the point of beginning construction?
What is the local economy like? Is there broad based employment, or one company, etc.?
There is a lot that goes in to developing a project of that size. The question is what experience do you have that qualifies you to do it? Any lender is going to want to know that. Someone with no experience stepping in to develop that number of units is very risky, and you have to find ways to mitigate the risk to lenders, either with money into the deal, experience of yourself, or partners that are experienced. Good luck.
Thanks for responses. According to realtor the seller no longer wants to proceed with second phase because he he no longer wants to carry the responsibility. Said it seemed like an initial good idea, but does want the headache of Developing land and going further. The First phase was built in 2006. They are currently at full occupancy. The last unit was listed as selling in October. 2014 for $96000. The area is growing. The land has been on market since October 2014.
Thanks for your insight and advice. I am taking everything into consideration. By this being my first physical undertaking, i agree that it is of quite some size for first venture. I am seeking all knowledge to help cushion the blow of jumping out there without a net and will do my due diligence. The area is Kernersville, nc. It is a steadily growing area where the housing market is good. Water, sewer, and gas is available. I will definitely look into things further before making a decision to move forward. Thank you again.
Great discussion everyone land development is one of my long term goals for my real estate endeavors so the conversation is already providing a wealth of knowledge. @Terrance Merck I'm in North Carolina and I know Kernersville should be a promising market but I'll admit I haven't scouted as I have my own markets. Good luck to you and please keep us posted, I'm very interested to see how this all pans out for you in that as I said I'm sure I will want to emulate your process one day.
@ChrisStewart yes propertycan be developed at this density legally and practically. The existing development sits on roughly 2 acres with 30 units.
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