All Forum Posts by: Doniel Winter

Jeremy this is a good discussion on where to start.

https://www.biggerpockets.com/forums/48/topics/722891-how-do-you-start-a-subdivision?page=1#p4268228

Are the units one or two bedrooms?

Two bedrooms can be more challenging to rent and don't command that much extra rent for the additional bedroom. I saw two bedroom apartments in the Grove Park neighborhood for rent for under $1000 a few months ago.

We've noticed a little softening in the rental market recently (price and time to rent), so I would look closely at your assumptions about what you can charge.

The main question is do you want to be a landlord?

Also, are they separately metered for utilities (electricity/gas) - why was your landlord paying yours? If not go to Development Services on Charlotte and inquire about that. If you can shift those expenses to a tenant that's ideal.

My friend just sold 69 Magnolia 28801 in Montford for $370k. Zillow and you'll get a decent comp, and I believe they asking $1200 for the upper floor recently...but don't quote me? 

Jay Hinrichs podcast #222 is a good primer on building and land development, particularly raw land. It doesn't specifically address what goes into a prospectus but it does touch on what to do in the beginning.

This is a discussion on creating a subdivision, and the information is also relevant to your question on what might go into a prospectus.

https://www.biggerpockets.com/forums/48/topics/722891-how-do-you-start-a-subdivision

There are so many variables to take land from raw to PINs, but I would begin with a trip to your planning and sewer departments to verify what's possible (zoning, # homesites, locations utilities, sewer/septic, water, etc). Then visit a civil engineer to get an idea of what's required to get your development approved. The raw land value for residential development will be greatly influenced by two factors: the total cost to turn it into homesites and the price of the final product. It can be a moving target over time. The closer you get to estimating that number the better idea you'll have about what the land is actually worth to a developer.

"Buyer to verify".... is a ton of work, so any and all legwork one can do for a prospectus will be valuable.

Black Mountain is a great community, you can't go wrong in the long run. You'd probably have no problem renting your house to long term tenants. Cash flowing your property with some combination of nightly/short term rentals on AirBnB or VRBO or an OTA can present some challenges.

Practically, turning nightly rentals can be a challenge. Good, reliable cleaning people can be hard to find, believe it or not, and really expensive because of the demand from other STR's in the area. I have a friend that was a Superhost on AirBnB, managing only 3 to 4 properties for an out of town owner, and there were often times where she was driving from Asheville to Swananoa and Blk Mtn to clean properties when her cleaning staff - hired by her, trained by her - failed to show up. Cleaners in the area get $20-$35/hour, and there aren't enough of them. I know cleaning fees are paid for by guests, but sometimes there just isn't someone to do it. She charged a 25% management fee, which included all guest communications and management. Some hosts in the area charge 30%. That's a chunk.

Relating to the bigger STR market and tourism, Black Mountain is not Asheville. It's a solid 15-20 minutes away on the interstate. When Asheville runs out of supply, which is traditionally only during leaf season in October, demand moves north to Woodfin and Weaverville, then east to BM. That's not to say BM isn't its own destination, but traffic is tiny compared to what's going to Asheville.

The last thing I would mention about the market is this: nightly rates are dropping and quickly. I first saw $120/night rooms in downtown hotels during weekends in January 2017. Having run BnB's, furnished STR's and long term rentals in Asheville since 1997, that was an eye opener.

Asheville proper has added so many hotels rooms, condo-tels, and STR's in the last three years it's astounding. In 2017 Buncombe County had like... 3500 STR's. And there is more of everything on the way. The Asheville CVB and TDA has all the data on this, it's available if you contact them.

One interesting trend I remember from 2017 is of the 1.9 billion or so tourism $$ generated in the area that year, the percentage of the pie spent on lodging was decreasing, year to year. Meaning people are spending less on where they stay and more on beer, food and entertainment. Hotels and BnB's were getting a smaller % of the lodging dollar, while STR's where getting more. So that might still be a positive for your market.

But the bigger story is declining nightly rates. So I would try and be conservative in your revenue estimations. You'll also need to maximize your revenue and push your rates @ peak times of year, particularly during holiday weekends, in summer, and definitely in late September through early November. There's a lull before TG and another through the holidays. Occupancy correlates a little bit to the school year and kids vacation schedules. NYE is traditionally good. But Jan-March have been super slow in the last three years. I now take those months off and close our inn.

$45k-$60k sounds like a lot to me for a rental... but hey I hope you get it!

Do you plan to manage it from another city?

Patrick, a map of what's possible and what's approved are very different propositions. If it says approved plans the person/broker selling can give you some information. Try and get a copy, head to your planning department, start due diligence. There are usually several senior level planners in a department, and my experience is you get assigned one for your project that liaisons you through the process.

You hire a civil engineer to design your subdivision vis a vis code/ordinances and help you get it approved by your city/county planning departments to build dwellings. Many cities have a comprehensive plan to guide their growth and development goals, and have adopted development ordinances that support that plan. Here's one:

https://library.municode.com/nc/asheville/codes/code_of_ordinances

It's all the rules that govern development, and your civil engineer should know all that's pertinent to your type of project. 

I've discovered good ones know most of what they should. Bad ones are shockingly ignorant.

Start by going to your county's GIS and get all the information you can about the parcel. Then research your city/county development ordinances online. Next, take your hypothetical parcel and visit your planning departments and just ask questions, you might find a person that's helpful (this may take a few visits).

Still interested? Find a civil engineer and see if one will give you the time to bend their ear and tell you what's possible. They can also ballpark costs. There's usually a job box on a build site, and in that box a set of plans by an engineer. If the development is similar to what you're interested in doing, approach the engineer on the plans.

I would also sit in on meetings - at your City Council, Planning Department, Board of Adjustments, etc. - related to subdivision projects. I've learned quite a bit just by listening to other developers push their projects through the approval process.

Like Jays said above, this is a deep pockets proposition and takes time, even on a small project. The one I'm doing - my first - has taken 2 years and two civil engineers to get through the approval process, and it's only 7 building lots. Had I not been able to self-finance the project to this point I would have been toast, carry costs on the land would have killed me before I even moved any dirt. 

Here are the estimated costs on my first project: $50k in civil engineering/permitting/etc, $300k in site work (silt fencing, lot clearing, grading, retaining walls, storm water, driveways/aprons, a city spec road, a turn-round for the fire department, sewer taps, a 325' water main & hydrant..... and more.) Land cost not included.

I should have 7 lots ready to "drop a box" early next year @ a per lot cost under par for projects in the area, a number I got by asking other builders (and real estate agents) with projects near mine. That's another resource, other local builders and developers, smaller ones in my case. Most have been really helpful, and if you ask a half dozen you start to develop a consensus on best practices.

My most important lesson so far: a referral to a good civil is invaluable. Then get a referral from your civil for your surveyor. Had I started with a better civil I believe my project would have been approved much earlier.

Developing is time and intensive. Risk is high. Be prepared to be hands on 24/7/365. I am paying for an education in development, something a developer friend said would happen @ the start of my project. "You don't know what you don't know", and had I to do it over again I would have talked to as many other developers, engineers, planners, contractors, utility contractors, graders etc. as I could before I spent my first dollar on a site plan. There's a ton of knowledge out there, and most people are happy to help someone who is just starting out. In the beginning, the more curious you are the higher your chances of success. IMO.

Go online and look at specs for sqft covered and SEER rating (efficiency). I've priced them at $1100/per zone for 300 sqft for Mitsubishi (line sets are extra) and up depending on SEER rating, meaning $1100 per room/zone no matter if the it's a multi-zone system or individual units for each zone/room. If you're handy, they're easy to install (sub-breakers/cement pads/hanging air handlers), and if you can find an AC guy to run the line sets and charge the system there's some $$ saved. I would opt for a multi-zone most of the time if cooling/heating more than one space.

They're incredibly quiet and efficient. Good luck.