Raw Land Development
I may purchase about 6 acres of raw land from family within the next year or two. The area around it has been developed (single family home communities) and it would seem that there may be an opportunity for me to develop the land (or sell to a 3rd party to develop). I am in the process of "getting smart" on this topic and wanted to reach out to the BiggerPockets community to see if you all had any tips, advice, warning, resources, references, strategies, etc.
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#2 All Forums Contributor
- Real Estate Broker
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then talk to good local civil engineer about the realities of developing it..
but first thing is the local planning authority
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#2 Land & New Construction Contributor
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Originally posted by @Bernard S.:I may purchase about 6 acres of raw land from family within the next year or two. The area around it has been developed (single family home communities) and it would seem that there may be an opportunity for me to develop the land (or sell to a 3rd party to develop). I am in the process of "getting smart" on this topic and wanted to reach out to the BiggerPockets community to see if you all had any tips, advice, warning, resources, references, strategies, etc.
Bernard - A lot f this will depend on the price point of the houses around the property and the cost to develop it. For general infill, subdivisions and scattered lots builders can generally pay 20-25% of the value or sale price of the house for the land depending on demand and price point. This is for a finished lot ready to build. Not necessarily cleared but all roads, utilities etc ready to break ground. You can call some local production and spec builders and ask them what they can pay for lots. Usually They will tell you. After you determine the price point on the lots you work backwards form there and subtract all costs of the development and a profit margin you are happy with to determine the price you can pay for the raw land. I like a 30% margin for net profit just to be safe.
First step is to determine if the project will even work from a financial standpoint. Start with the end value of the buildings or lots and work backwards.Next check with the city or county to determine if you can do what you want to do and what is required for all zoning approvals and the time frame, Ask if you have to install curb, gutter, sidewalks, street signs, street lighting or any other special requirements. Are there any specific street design requirements, DOT requirements, permits or traffic studies. DWQ, Army Corp or any other environmental requirements or permits. General permit fees, proffers, water/sewer tap fees and the process of setting taps and connecting. Do you need to install manholes or fire hydrants. What are the bonding requirements, inspections and CO process. You also need to check with the utility companies and get cost estimates from them for availability, fees, hookup charges, transformer and power line/power pole locations or relocation requirements, water, sewer,gas, cable etc You will need ball park cost estimates from site work contractors for site work, roads, installation of utility lines etc.
This is just a broad high level run down of the process but should give you some things to start with and think about.
@Greg Dickerson Thank you for the advice, Greg! I am just getting started but that was extremely helpful.
@Jay Hinrichs. Thank you so much, Jay. I truly appreciate you taking the time to provide me with those very helpful nuggets!
@Bernard S. Did you ever get any responses on this? I recently purchased 4 acres outside of Greensboro. I am looking to partner with a developer in a ground lease deal to build a rental community. Let me know how you approached this.
@Bernard S.
Well by doing a little home work you figure out what is possible to develop and the density allowed. Also check out utilities, power, water, fire hydrants, and sewer. Find out if it's at the porperty what side of the street it's on and if it's not there find out how far away things are. This will help put some rough costs together and if you decide to sell it you will look like you did your homework and that is worth something when you go to sell.
@Christopher Price Hello Chris - I got some really good info but I am still holding. In my case, my inlaws own the land so we took a step back to see how the pandemic evolved. How is your project going so far?