Advice for a newbie on RE development of existing property

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Advice for a newbie on RE development of existing property

Maria V.
Jamaica Plain, MA · Member since 2016 · 7 posts · 1 vote

HI - not sure if this is the right group, but hoping it is. I just joined this site as I am researching options for developing existing property in a highly marketable area in Boston. We own a one-story commercial building, on about 20,000 square feet. Currently it is fully occupied with 5-6 commercial tenants. Mostly office space and a chiropractor. The area is in a hot market at this time and we have received several unsolicited offers. However, we are interested in exploring developing it into a residential multi-family building (either as condos or apt rentals - not sure yet). It is currently zoned or easily able to be zoned to a 3 story, 22-unit property with underground parking. This would be a large development project, and we are not sure whether to try and develop it ourselves or bring in an investment partner. As you can see, this is in the preliminary concept stages. We've spoken to city official we have relationships with, local, trustworthy business associates, an architect and contractor who all think it is a feasible idea. What are the things to consider when exploring developing on our own (which would entail personal collateral and cash investment) vs. with an investor partner?

Any general advice and things to consider on how to proceed with our options. Please forgive my ignorance, but that's what I'm here for - to learn from all you pros!

Thank you.

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  • Ross Leavitt
    Real Estate Investor · Springfield, OR · Member since 2013 · 94 posts · 35 votes
    10y

    That sounds like an exciting project! We've built 4-plexes, many large houses, and are in permitting for some small apartment buildings, that are rented to students at OSU here in Corvallis, OR. We did the 4-plexes with a partner who has been a longtime friend and colleague with my father in his other business, and everything else has been on our own.

    I am glad we did those two projects with a partner, because he has more experience in the market than we do, and he had very good input in the design and construction. We also get his input in determining rents, and potentially down the line, selling the properties. Of course, cost of that is that we're sharing the returns.

    However, since we have done many more projects on our own than with him, we get to benefit from his input with our wholly-owned properties as well. To us, that is the best of both worlds. Partners with an expert on one or two projects, wholly-own similar projects. Share a little of the returns, benefit from the wisdom permanently on everything.

    I'm assuming that you have access to the cash you would need to do it alone and that is a real option, since you're asking the question. I suppose that the other issue is whether you have other projects you'd rather use that cash for, with even better returns. Have you talked to a banker to see how much they would loan for construction, given your current equity position in the property?

    0Reply
  • Maria V.
    OP
    Jamaica Plain, MA · Member since 2016 · 7 posts · 1 vote
    10y

    Hi Ross, thank you for your response. We potentially have access to the cash via a private funder, but no we haven't talked to a bank yet.  This is a family property and one of us wants to try and develop it on our own and others want to bring in partners. We are not experienced enough in this type of project, so I'm leaning towards voting to work with a development partner. Your experience is really helpful. Thank you!

    0Reply
  • Maria V.
    OP
    Jamaica Plain, MA · Member since 2016 · 7 posts · 1 vote
    10y

    Hi again! A quick update... another option at this time is to also sell the property outright to an investor/developer. Given all our options (develop ourselves, partner with a developer/investor, or sell), what should be our next steps in determining what would work best for us? As I mentioned in my original post, we are complete newbies but do feel we are sitting on something potentially lucrative. Should we hire a RE Strategy Consultant - and how much might that cost? Upon some quick research, I feel like we need to do two things:

    -Hire someone to do a feasibility study

    -Pay for a property appraisal/market evaulation to see if it's worth selling now, or developing and reaping the rewards later.

    Would a RE Strategy Consultant be able to help with both items?

    Would love some thoughts/suggestions.

    Thank you!

    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    A friend of mine is on the same boat as you. His cost excluding land and utilities is about 1M, he is confident he can do it for 800k, he is eyeing for 18 unit 2 storey apartment, he spent about 600k on both land and utilities and permits, but it might bring 900-1100/unit. The more important thing is your soft and hard costs, however, 5-6 commercial clients will easily be beaten by 22 unit apartment. I would say a developer is a better deal to demo and build, hire one instead of partnering, for your property value, i have no idea on how to value it.
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  • Maria V.
    OP
    Jamaica Plain, MA · Member since 2016 · 7 posts · 1 vote
    10y

    Thank you for your advice, Manolo. With so much $$ at stake, it's so important to be completely informed and make the right call.

    0Reply
  • Nick Spenello
    Investor · Atlanta, GA · Member since 2016 · 4 posts · 0 votes
    9y

    @Maria V. I'm just wondering if you have you made a decision on this yet? I'm most curious if you have decided to renovate it.

    0Reply
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