Understanding Land Entitlement and Ground Up Construction Process
Understanding Land Entitlement and Ground Up Construction Process
George Ansong – GAV Capital Partners LLC.,
There are so many niches in real estate investment – like Buy-Fix- Flip, The BRRRR Method etc. (Buy, Rehab, Rent, Refinance, Repeat)
One of the niches that is hardly mentioned is Land Entitlement (Lot Development).
Land Entitlement is the legal process by which a developer or landowner gains all necessary approvals for a real estate development plan. And if you are navigated entitling land, or you are working through a project in a new municipality the process can be daunting.
However, there is a lot of money to be made in ground up development. What are the processes in land development: Here are the processes.
- Analysis of the designated area as far as the proper use and land acquisition’
- Know the zoning information to conform to the land use – if not you might rezone and it might take a longer time
- Proper analysis of comps in the area
- Preparing to fund the soft cost from your own resources – Survey. Architectural drawings, Engineering Report, Land Disturbance Permit (LDP), Building Permit, - soft cost has to come from your pocket before the construction loan
- If you are building the bank or the private lender will fund the Hard Cost – the actual construction cost – Foundation, Sheetrock, Windows, Roofing, Plumbing, Electrical, HVAC,
- Horizontal Cost = Infrastructure cost – road works, tap into city water and sewage, install electricity etc.,
- Vertical Cost – Actual construction cost – The Actual building Cost
- Financing – Understanding the draw system – As an investor you have to fund most of the deals from your own pocket in order to be reimbursed. NOTE: Real Estate is very capital intensive – you need to fund the soft cost and the initial construction cost like lot clearance, and foundation before you put in a draw request. Lender will inspect the work completed before issuing the draw request.
- Final City Inspection before issuing a CO – Certificate of Occupancy
- Time to Market- Advertise – Promote and Stage
- There will be a lot of challenges and problems – In real estate all problems can be solved by money and paper work (documents)
- Sell the property – receive your funds and repeat the system – NOTE – You make money by rinsing and repeating the system.
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