All Forum Posts by: Scott Krone

@Briana May, @Zach Westerfield, and @Laura Janosko - a non-profit involved in real estate development that comes to mind is Habitat for Humanity.  Wonderful organization.  We have also worked with churches (non-profit) to acquire land/buildings, develop and build their spaces.  There are numerous models to follow.  

The issue I believe you are trying to address is the equity portion.  In both of the scenarios I described above is the equity required for a loan is via donations - not expecting a return.  Banks will want to see the borrowing entity (501 c3) has a history.  If not, they may look at the sponsor of the 501c3 to back the loan.

@Adam Biya - welcome to the world of self storage.  We are not in the DC market, but have connections around the country in self storage.  We are focused in the Midwest.  Feel free to reach out with questions.  You can also check out our webpage for free information on self storage, and market analysis information.

@Isabel Costa - welcome from just up the road!   Evanston was also our first investment property - a loft condo.  Feel free to reach out.

@Derek Epperson.  As in most business field, there is no "standard".  We see all various ways in which other operators in our industry structure their deals.  To answer your question, "Yes" it is common.  However, there are factors to consider:  Is there third party management?  Are they developing to flip?  Is there a long term hold strategy?  Percentage Splits or preferred returns?  etc etc.

Bottom line - one needs to evaluate does the proposed structure make sense, does in align with your goals and strategies, and do you align with the operator's values and business.

@Account Closed  Sounds like your dreams have changed.  That is not crazy.

Thank you @Jaspreet Baveja.  

@Sianni Pineiro A mentor is a great thing.  When I was in architectural school, I sought the professors who where actually active in the architectural profession versus full time academics.  My first mentor was my professor with whom I also worked for as a developer.  At that stage of my career, I needed a mentor who showed me/taught me the profession.  It is a common phase in architecture known as an apprentice.  

After I started my own firm, I realized I needed a mentor who could guide me in business (generally versus real estate specific).  A completely different mindset that allowed me to expand how I analyzed my business.  I agree with @Cody Barna, in both cases my mentors where successful in their business and did not rely upon "coaching" income.

@Renee Yarbrough  To answer your question, what are the pros and cons.

Pros - at the stage you are describing there is lower risk for unknown construction.  The largest unknown is the underground plumbing.  You have an approved set of plans, and a permit.  The entitlement process is complete.  You can bid most of the trades from a new perspective.

Cons - one needs to confirm the following:  1.  Permit status.  Are there any permit violations or stop work orders that need to be corrected.  2. Liens.  Are there any unpaid subcontractors that have place liens on the property.  3.  Scope the underground to insure it has not been tampered with.  4.  Inspections.  Has it passed any inspections (rough framing, underground, concrete, site work) - get copies of inspection reports.   Plumbing, Framing, and concrete may be your only partially completed subs.  Need to confirm if the roof is 100% done (any saddles, flashing, terminations, etc)

@Dana A.  We have used forums such as Bigger Pockets, Midwest Real Estate Summit or other national programs to meet people.  Some of these groups than have facebook communities, "bootcamps"/now virtual bookcamps, and conferences.  We attend those to meet people in person.  There are many good real estate networks in the Bay area.

@Shawn Choi - a very interesting question, as most assume one is akin to the other.  In the traditional model of real estate, there is a developer who hires an architect.  The architect creates plans, and then sends it to General Contractors.  They provide bids to the Architect, who submits to the Developer.

In this sense, I equate "flipping" with Contractors, and "developing" with "Architects".    Here is why.  @Greg Dickerson makes a great point about vision.  Most flips the "program" isn't really changing that much.  The vision is by nature limited.  With developing, one needs vision similar to when an architect looks at a blank sheet of paper (yes I am old school) or a blank "monitor".  Here are my responses to your question:

1.  The ability to see a situation from multiple angles.  One has to look at the situation from an equity position, lender position, architectural perspective, construction perspective, legal perspective, entitlement perspective, marketing perspective, and sales perspective.  Do you have to be proficient at all of these?  No, but you have to be able to know what you are talking about as your decisions will impact every single aspect of these.  Ultimately, you need to be a sales person, because you need to sell your idea to:  municipality, investors, bankers, architects, contractors, lawyers, brokers, and buyers.

2.  Most developers take fees.  It takes time and effort to accomplish all that goes into developing.  There is a balance between Overhead and Profit.  Banks and investors tend to insure the developer is not taking profit before the completion.  Some fees can be built into the project.

3. The only ways I know to pivot into development are: 1. working for a developer, 2. investor who requests more involvement than a passive, 3. a JV, or 4. Mentor/coach.

4.  Having a few flips does not mean you are a developer.  Build the necessary relationships as your flips grow in complexity.  For instance, when you flip, are you working with an architect, a title company, lawyer, broker, etc.  How sophisticated are your partners.  Has your lawyer or you gone through an entitlement process?  Has your architect done ground up projects that encompass, survey, architectural, civil, structural, geo technical, MEP, etc

5.  Learn before you do.  Ask yourself many times over, "What am I missing?"  How else can I look at this?

I was in graduate school getting my Masters in Architecture.  My professor was a developer, architect and builder.  As his TA, I worked in his office for 3 years as a student and 3 years full time.