Clueless Developer to Partner with?

3 Replies

Hello all- I am still a newbie in the real estate investing scene. I am still putting my team together and understanding the strategies available to dive in proper in the next year. 

An opportunity came across my desk which I welcomed as maybe a sign to jump in sooner rather than later (..yes.. analysis paralysis). A developer (friend of a good friend), propositioned me on a new property he's looking to acquire. It's two lots with a single family home on one. I'm not totally sure what my role would be however he wants me to come with a percentage for down payment to purchase and then share in the profits. Before I could even understand the numbers, I looked at the prospective property... oh boy. 

I may not be excellent yet on spotting investing deals based on numbers however I am a licensed architect and I know site planning, zoning and building codes very very well. Especially in my hometown. This guy has made a whole proposal and solicited investors while it seems that he has not done his research and due diligence. He shows several exit strategies with profit expectations and honestly none will actually work as he has planned. For one-  the lots are very irregular therefore cannot easily be subdivided. Also this limits the ability to build on it due to the minimum zoning ordinance requirements. I feel bad as I have to be the bearer of bad news.  

If I could offer any advice, if you do not know how to properly evaluate a property for a new development, then hire someone to or get a knowledgeable person on your team who can. He has wasted months and months with this and ultimately I will advise him not to purchase it.    

Unfortunately, a lot of people become overly optimistic with zoning and permitting and especially their timelines, it is good that you were able to figure out the flaws in the strategy on your own.

@Jared W Smith

I always have said for many years..."everyone wants to be a developer...." doesn't make them competent and doesn't make it true.

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