Land a Million dollar Development

7 Replies

Investment Info:

Large multi-family (5+ units) other investment.

Purchase price: $225,000
Cash invested: $155,000
Sale price: $1,395,000

We took a piece of raw land through the rigorous seattle permitting process. Project was a mixed use building consisting of 32 micro housing units and 2 ground floor commercial spaces.

What made you interested in investing in this type of deal?

The property was zoned for multi family and no one was buying it. it was a challenging site, but the price was far too attractive to pass up. The potential gain from development was much greater than a flip or other strategy.

How did you find this deal and how did you negotiate it?

This property was on the MLS, we made several offers and kept getting beat out by developers whom would later back out of feasibility. When it came back in market we pushed the price down further.

How did you finance this deal?

We negotiated a seller carried loan for 1 year term. Then paid their loan off and held as cash.

How did you add value to the deal?

We entitled the property for a mixed use building consisting of 32 micro housing units and 2 ground floor commercial spaces. In addition we mitigated some of the more difficult utility items including relocating a power pole.

What was the outcome?

We nearly tripled our money.

Lessons learned? Challenges?

If you get a great price take on a challenge, but make sure you have enough margin to ensure success.

biggest money in real estate is made in path of progress and up zoning etc.. tons of risk but rewards far exceed most real estate deals.. you get what you work so hard for.   and one stroke of a pen.. IE conditions of approval from planning commission can make you millions in one signature.. but what leads up to that signature is time experience money persistence negotiations .. all sorts of things.. never a dull moment.. 

I have done these were I put up the 100k and lost it at entitlements also though.. it can go both ways.

Any way congrats on your project.. 

@Mark Fries I can certainly see the rendering looks that way. Renderings are simply used to show the city and buyer roughly what the building will look like. We typically don’t spend much money on renderings since they are not important for the development of this size.

@Jay Hinrichs as you pointed out, you can lose money on development. Where I see the most people lose, is when they are not doing their du diligence upfront, but at retail price, and don’t know how to develop a property or what it’s exit value will be.

The best thing any developer can do to hedge against risk is to buy and asset that works as the asset itself with upside from development. Example buy a duplex that works as a duplex, but can be redeveloped into a 20 unit apartment.

This helps explain why I see listings of a property sold with plans etc, and it's "ready to issue" permits. People specialize in this long drawn out process and someone else specializes in actually building it.

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