First Ground up constrcution deal

8 Replies

I am considering a deal in my market in which I found a significantly underpriced parcel of land blocks for major transportation hub in a gentrifying area.  I am close to securing funding for the acquisition through private investors and have a bank lined up for financing the build of a 3 unit multi family.

The part I am concerned about considering the seemingly low price is that there my be some unknown issue with the land.  Can anyone point me in the right directions as to where I can obtain public info regarding the integrity of the land.  The first exposure that comes to mind for me is pollution but like I said this is my first deal of this type.  So I guess there are 2 major questions here.

1.  Where can I go to obtain public info so I can do my due diligence on the integrity of the land?

2.  What are the primary red flags I should be keeping an eye out for?

You definitely want to call either the city or county zoning departments. You want to make sure the zoning is listed for the proper use. If not, it will take lots of time and money to get it zoned for the proper use (multi-family, commercial, etc.) Sometimes you can find that on their website. Then you can search in the property clerk's records to see who previously owned the land and what their uses were. You want to stay away from any use like gas stations, auto repair, dry cleaners, etc. that would require environmental remediation. That will cost a ton and require environmental engineers.

It might be worth it to pay a few hundred dollars to a civil engineer or surveyor to do this search for you. 

If it is clear, then move forward!

If it is adjacent to transportation station and/or you are building for low-income, look for potential grants for TOD (transit oriented design), HUD or beautification-related functions. In many blighted areas that are trying to redevelop, they create Community Redevelop Agencies (CRAs) or something similar to provide funding. It may not help with construction, but will help with landscaping, parking, etc.

Good luck! 

We recently purchased a lot steps from the beach and will be constructing a small multi-family. 

I don't think any issues identified with the land would be public record. Plus, if you bought the land and there was some environmental remediation required, it was known, and not disclosed, you would have recourse. Best bet it to make your offer contingent upon a soil test. Probably cost you two grand and give you piece of mind.

There might be some grants like @Lindsay Diven said, also check with trans dept on your area to double check they don't have expansion programs. In the airports, the airport authority has a program to sound insulate all houses within x miles from them, they might have some similar programs on your transport authority. Contact housing department also, they should know most of the programs. First check with county and city that you are qualified to do what you want to do, they should also be able to let you know if there are any issues, nothing is for certain but at least get an exit strategy that will get you out when something goes wrong.

An environmental engineer can assist you with pollution if that is a concern.  There are many other issues that may be potential risks as well:

-Easements

-Tree issues if you have ordinances

-Lot configuration for the intended use

-Utilities

A good civil engineer can do a feasibility study for you that may help out.  The items I listed above are a subset of many that may impact building for your intended use.  

I recommend to get a Phase-I environmental report. It costs roughly $1800, but should have reliable answers to the questions you have. Many lenders may require such a report anyway, so you might as well get it before you purchase the property.

Go to the city/county/whoever offices and talk to the people that work in zoning or the development office. Ask tons of questions and be incredibly nice to whoever you talk to.

 In a city these folks sometimes know all sorts of information about the lots in their area, especially if someone has tried to do something with the land in the past. 

If you're worried about pollution, follow the advice of others here and get an environmental test.

For my urban-infill lots, here are the things I review in Austin:

Anthony, 

This is my approach, so take it for what it is worth. We develop small-mid sized projects in Philadelphia. Often times, Geo-Technical or Earth Engineers will be able to do a "test" for roughly $2,000 on the parcel. 

I will point out that on a small build it may not be worth that money because the "test" they do is not a soil sample or boring of the land, it is a research into the property to determine if a laundry facility or auto body shop or some contaminate / polluting type of business or entity was once on that lot a long time ago. By talking with zoning and the community planning commissions you might be able to source that information on your own quite easily. 

The bank you are working with usually will require an Environmental Review. Sometimes the review is a Phase I and sometimes it is a checklist of the items I am talking about above, which will save you the money. Typically regional banks with loan under $1M will not require the Phase I. 

Best of luck

- Sean

GRIT Construction & Development, LLC

Hi @AnthonyGreene, I currently have two ground up construction projects here in Philadelphia. Let me know if you need any referrals. It is all in your power team.

Regards,

Joe

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