Hi Ashley,
It is great that you have investors that are willing to invest in your project(s)! Sometimes it can be difficult to obtain the right type of financing- whether it be equity or debt.
Since it appears that you have already determined that you want to build less than 5 houses, are you looking to do traditional single family houses or townhomes? If you haven't asked already, you need to know how much your investors are willing to invest and what ROI (Return on Investment) they want.
You also need to ask yourself the following questions: Do you have money to invest ("skin in the game")? What is your borrowing capacity? Are you willing to do a lot of research, and so much more? If you can answer undoubtedly with a “yes”, this is a good start.
It is difficult to give you an answer as to how much money you will need because you have to know how much the land will cost and you will need to know what the soft and hard (construction) costs will be. Soft costs can include, but not limited to, professional fees, loan interest costs, city development fees, investor ROI, developer fee, insurance, and realtor fees ( if applicable).
The other remaining things, and not all inclusive, that need to be looked into are, which would be considered as 'FACT FINDING' (before you venture into a real estate development project):
(1) What type of incentives does your city offer to developers? What is your city's Housing and Economic Development Plan? (Most developers want to find out upfront how their project can save money, such as buying land at below-market cost, low-interest loans, property abatements, and other incentives that a city can provide in certain neighborhoods.)
(2) Which site locations interest you and why? (It is very important to know what the land's surrounding area offers, such as nearby grocery stores, parks, retail, schools, public transportation/light rail, and employment centers because it will be easier to attract potential homebuyers or renters.)
(3) FInd out who your City Councilperson or Alderperson is and what has she or he done to help real estate developers. Please keep in mind, that City Councilpersons or Alderpersons oversee different jurisdictions. So, if you live in one particular area but the land that you are interested in is in a different neighborhood, then the City Councilperson or Alderperson may be different.
(4) Who are the best Market Research Firms that can provide a Market Analysis (highest and best land use)? (Most lenders require a Market Analysis or a BPO (Broker Price Opinion) before considering a construction loan, especially since you are wanting to build 5 houses. The lender would want to know if the market in a particular area is better suited for rental or for-sale units and possibly affordable housing.)
(5) Which CPA firms and transaction Law Firms have an excellent reputation in real estate development? It is vitally important to have these 2 different types of professionals on your team upfront.
(6) And, without question, you need a strong Project team. Do research and gather pertinent information on which architectural, general contractor, civil engineering, electrical engineering firms have several years of experience in the type of development that you want to pursue. I will say, that since you want to start off with a small project, you may only need an architect, general contractor, and civil engineer. A Civil Engineer can determine what type of utilities currently exist on the land and what will be needed for the actual project.
It is my hope that the information that I have provided has been helpful or at the very least insightful. Much success to you!
