I'm currently talking to the owner of 3 adjacent properties in Mountain View, CA (old multifamily) who is waiting for the city to approve a permit to construct a 15 unit apartment complex on the 3 lots. The owner however is getting older and is interested in selling the project to another investor.

He got 1 offer a few years back at 9m but that investor doesn't seem to be interested in the project anymore. Currently I am looking for buyers for this project and am interesting in wholesaling it.

Does anyone have experience wholesaling a development project like this? I don't have experience underwriting multifamily development. How much information would a potential buyer want?

Originally posted by @Max Kibler:

I'm currently talking to the owner of 3 adjacent properties in Mountain View, CA (old multifamily) who is waiting for the city to approve a permit to construct a 15 unit apartment complex on the 3 lots. The owner however is getting older and is interested in selling the project to another investor.

He got 1 offer a few years back at 9m but that investor doesn't seem to be interested in the project anymore. Currently I am looking for buyers for this project and am interesting in wholesaling it.

Does anyone have experience wholesaling a development project like this? I don't have experience underwriting multifamily development. How much information would a potential buyer want?

This will be very difficult for you to wholesale as a developer will just wait you out knowing you can’t close. The best bet is to get all of the info together a developer will want to see like all the entitlements including any surveys, site plans, building plans, permits and approvals etc. Once you have all the info put together a NDNC with a finders fee then present the project to some developers.

How can you sell a project that hasn't started? It is a plan, not an income producing property. You wouldn't need to underwrite it. Take it to a lender and have them underwrite it. They will tell you if it is financeable. If it isn't financeable, that limits you to cash buyers for a $9M deal. So far, it doesn't have approval, so it is not even a project.

@Greg Dickerson  Thank you for the helpful feedback. Do you know if there is a place I could download a NDNC to use? I've done this with other contracts. In order to get all of those other documents I'm assuming I would reach out to the current owner of the property and ask for them.

Also how would the finders fee work? This seems different than a contract assignment. Would the transaction close in the developers name but escrow would have the NDNC and pay me out of escrow?
 

@Anthony Dooley I guess by underwrite I meant somehow try to predict what the end constructed property would cashflow as a way to know what price to negotiate for. What do you mean by having a lender underwrite it? How would I go about doing this?

Originally posted by @Account Closed  Thank you for the helpful feedback. Do you know if there is a place I could download a NDNC to use? I've done this with other contracts. In order to get all of those other documents I'm assuming I would reach out to the current owner of the property and ask for them.

Also how would the finders fee work? This seems different than a contract assignment. Would the transaction close in the developers name but escrow would have the NDNC and pay me out of escrow?
 

You should be able to find a free NDNC online or get one from a local attorney.

The finders fee would be paid by the end buyer when they close. This would not be an assignment as you would likely not be able to get the property under contract without sufficient POF and even if the seller is willing to allow you an opportunity to assign the deal a developer will not be able to close quick enough unless this is a really hot property in a high demand area.

Your fee will depend on the value and desirability of the property. The more desirable the higher the fee. .5-1% is reasonable 

 

@Greg Dickerson So are you saying that I wouldn't be able to get it under contract because the seller would want POF? Also there is no agent involved. What would keep the developer from being able to close quickly? I'm not sure how in demand the property would be unless it was at a really good price. One big problem I'm having with this is that I have no idea how to run comps on something like this so I don't know what a fair price would be to try to get the property under contract (if I even can do that). I'm thinking about this from the perspective of having wholesaled single family and in those situations the investor always closed within a week or so.

@Account Closed it sounds like you are trying to create a proforma. Banks love them, but they are purely speculation and pie in the sky projections of what the potential income could be one day. At this point it isn't worth much because for $9M I could just buy some land, apply for approval, and start building my own deal. The only thing that will make yours marketable is the approved permits. A commercial loan guy can give you a proforma that was used in a similar project for you to use as a template.

Originally posted by @Account Closed I guess by underwrite I meant somehow try to predict what the end constructed property would cashflow as a way to know what price to negotiate for. What do you mean by having a lender underwrite it? How would I go about doing this?

This would be a land play only. You will not be able assign or sell a proposed development project unless you have the ability to complete it.  No developer will accept the assignment of a contract for a property to be built as they would have to build it in order to sell it. You want to get all the info together and take it to a developer and get a finders fee for bringing them a fully approved project. They will be purchasing land only so that’s what you need to know the value of.

 

@Anthony Dooley So you're saying the main thing thats important is the city approving the plans. So without that having happened no one will be interested in trying to close on this? Is it even possible for the property to transact while the plans are under review?

You cannot use comps for a completed development to determine the value of a project that is not finished. The value of the finished project would be based on income, not comparable sales. 

Originally posted by @Account Closed So you're saying the main thing thats important is the city approving the plans. So without that having happened no one will be interested in trying to close on this? Is it even possible for the property to transact while the plans are under review?

Anything is possible, but who is the buyer? Why would they buy your deal? Right now it is just an idea and some land, so the value now is the cost of land.

 

Originally posted by @Anthony Dooley :

You cannot use comps for a completed development to determine the value of a project that is not finished. The value of the finished project would be based on income, not comparable sales. 

Appraisers value new development based on income, comps and cost to build with heaviest weight on comps and cost since there is no income. Banks will lend a percentage of the cost and not the appraised value.

IMO. this seller needs a commercial agent that has a "rolodex" and can sell this property in a timely fashion for top $$....  I would suggest helping him find that agent and then ask for a finders fee....  this is where he will get eventually so maybe help him and earn some $$ and experience.

@Mary Mitchell I've been reaching out to a few agents already with something like this in mind. What do you mean by "this is where he will get eventually"? 

I'm a land broker who specializes in selling new development sites. Wholesaling land deals is pretty tough, since there isn't that much margin usually, and plus the timeframes (feasibility period and period after that to close) are so tight, thus it is a crazy footrace to try to find a buyer while the clock is ticking on your escrow period. Many developers wants 45 days approx. to do their feasibility. You could potentially get some type of finders fee though; if you are not licensed it's better if the seller paid it. [Solicitation Removed by Moderators]

@Bryant Brislin Hey thanks for your feedback.

@Anthony Dooley I'm interested in contacting a commercial loan person to give me a proforma. Is this something that would be done for free or..? You also mentioned having a lender underwrite the deal. I've never contacted any type of lender so I'm interested in how doing this could benefit me in a wholesale deal or something else like getting a finders fee as was mentioned above. Like I said before my only experience in real estate is wholesaling single family homes so I never had to be in contact with a lender.

@Max Kibler

Not sure loan officers are going to create a proforma for a person who they don’t know and has no chance of closing. As mentioned above. Help the seller find a great broker and offer some value and put your hat in hand and maybe you’ll get a couple of bucks and learn something. If you jerk around some old guy on a 9MM deal the kids or estate attorney may end up suing you. They clearly have money and this wouldn’t be like jerking around broke home owners wholesaling their stuff with limited recourse.

Originally posted by @Account Closed I've been reaching out to a few agents already with something like this in mind. What do you mean by "this is where he will get eventually"? 

 if he wants to sell for top $  he will figure out he needs a very good commercial agent to help him. If it doesn't happen while he is alive, his heirs will find an agent.

“Wholesaling” land development deals is not that uncommon. Typically, a developer enters into a contract to purchase a piece of raw land contingent upon receiving the desired approvals and closing occurring 30/60/90 whatever days after such approvals. As he is obtaining the approvals (and once he is far enough along to have a good sense of what is going to be approved) he will start marketing the approved project to a more institutional developer (i.e. a national home builder, a large multifamily developer, etc. depending on the nature of the project). After obtaining all approvals, he will assign the contract to the end-developer. 

This typically works best when the assigning developer has specific local knowledge, permitting abilities, relationships, or expertise that allows him to approve a project that is more valuable than the “by-right” development. It also requires a substantial up-front cost for engineers, architects, and other consultants that can run in the $100k’s. For a savvy developer, this is a way to get a huge return with only the permitting cost (and usually some hard money) at risk. It also requires the ability to convince the land owner that you are the real deal—something that is increasingly rare these days. 

This doesn’t sound like one of those opportunities. 

Originally posted by @Mary Mitchell :
IMO. this seller needs a commercial agent that has a "rolodex" and can sell this property in a timely fashion for top $$....  I would suggest helping him find that agent and then ask for a finders fee....  this is where he will get eventually so maybe help him and earn some $$ and experience.

 Seller definitely needs a licensed agent for this if he/she wants to sell, the seller does not need an unlicensed wholesaler. As to you receiving a fee, no licensed agent is going to pay you a fee as they could lose their license for doing so. Collecting a referral fee from the seller - not sure why they would pay you for anything as you have little to no experience in this by your own admission and all the seller needs to do is go online to find any number of commercial real estate brokers/agents without having to pay a fee.

I like your determination and desire to make a deal happen here, but quite honestly, you are way ahead of yourself and way out of your depth here. Get educated first on wholesaling (if that is what you really want to do) and do it legally. Assigning the contract here in CA (assuming you will then publicly market that property, have negotiated the price, located a buyer, and received a wholesale fee for it) is considered brokering without a license here in CA and many other states. So again, get some education, then go out and do it.