Land Development 101 - How to Make an Offer With Confidence
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- Опубликовано: 14 окт 2024
- As a follow-up to our last video "Planning & Due Diligence" ( • Land Development 101 -... ), if everything is checking out after the "Feasibility Analysis" stage, then the developer will put together what some may refer to as the “quick and dirty” or “back of the napkin” analysis to come up with an offer. Learn how it's done here!
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These videos are awesome! Please make more, I love them. You should make a video on what turns more profit, a big apartment complex vs small single family homes on individual lots, or mixed use. Would be interesting.
That depends on economics.
Agreed, totally depends on the location. Some areas may be best for townhouses/condos and others may be more profitable with single family homes. For example, a lot of the coastal areas here in Southern California area will build condos because the demand/numbers are there, whereas if you go further inland it's far more profitable to build single family homes.
Great videos! been watching them all, looking forward to the next uploads.
Thank you!!! Stay tuned. We have more coming.
Great videos, please make more. Subbed, thanks.
Thanks for the feedback, Juan! Will have more coming. Subscribe to the website if you haven't already as we've also been working on a "Case Studies" book that covers real life examples of land development experiences with lessons learned. It's going to have illustrations and everything. It's going to be huge! So keep your eyes peeled for that when it launches!
@@landdevelopment1019 that sounds great. If you can make a video on how to find such big development projects that would be even more awesome. The financing part of development, or where to find private investors willing yo invest in these projects. Thanks
Super helpful. Thank you!
Great Video, I personally would structure it like this:
Analysis (rough) - Offer - Feasibility(deep)- entitlement - Land Dev.
That’s how we do it anyway 🤷♂️😁
I like that. Do you find that you're able to complete a full feasibility analysis before any sort of due diligence period with the seller is over?
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Amazing
Great video! very insightful. I was wondering, what are considered the hard costs for land development, what would that entail exactly? and how are we able to get an estimate for that?
Good question. You can what my first video in the series "Land Development 101 - Introduction Video #1". Basically, all the construction in the field will make up your hard costs (i.e. rough grading, utility installation, road improvements, any walls/fencing, etc.). The best way to find those cost estimates is to talk with local subcontractors in your area. If you don't have any plans yet, you'll probably have to rely on trying to get unit costs from them. It can be a tedious process, though, to try and get in the ballpark without any plans. But if you roughly know what size lots you want to build, you may be able to get VERY ROUGH cost estimates on a "cost per lot" basis. Then you can refine those numbers as you progress in the process.
Have you made a video on seller financing options? Please provide link.
Great video, How did you come up with hard cost 75K. What’s the best way to figure out hard cost quickly as an estimate? Is a dollar amount per sqft of the lot.
If so Is there a good resource site to know that cost in different states?
Good question. A good way to get a rough cost estimate for this is to speak with subcontractors who are actually doing the development work. Ask them how much it's been for them to develop their last few communities. And then you can either break that down into a cost per lot, or a cost per acre, square foot, etc. Obviously this would vary between each project, but that should help you get a rough estimate to at least get you close enough in the ballpark when making an offer.
I hope This is not an annoying question. But using these numbers multiplying by 50 lots what would you offer the seller ( Land owner) or what would be a Good price to offer the Land Owner. Great videos By the way. You have been a great help. Next would be a Basic pro forma video to get the foundation of a project.
Hi Kd, unfortunately without knowing the specific area you are looking in I would not be able to give you specific numbers. As I mention, a finished lot value differs in each area. To get an answer on a more local level you'd be better off talking with local land brokers/realtors to get the details. Hope this helps!
@@landdevelopment1019 I think you read to much into his question. He said using those numbers, so wouldn't it be.... $45,000 perlot x50 lots= $2,250,000 Total
@@003sim Thank you for catching that. My apologies.
How can I network with people in the state that I m buying the land and doing the development? Is there any networking groups or mentors to seek out?
Is less land development costs include construction for a house and is this strategy to develop the land or also to plan on building a house
Typically the “finished lot value” is inclusive of the construction house costs. But that’s generally what the market overall is bearing. But it definitely doesn’t hurt if you run those numbers yourself to be more precise. And to answer your second question, this example is analyzing a property that needs to be developed as well AND cost to build the house. Because even if you don’t want to build the house yourself and just want to sell it after it’s developed, you’ll still have to run the construction numbers as well. Otherwise, how will you know if your project will be a deal that will sell down the road?
Why are soft costs so high? I count permits 1k impact fees couple thousand engineer 5k. Maybe 10k for extras. How did it go to 60k?
I'm also including all the costs for your consultants and engineers. And depending on where you are, you may not be spending as much as someone in California. But you can easily drop $25k to the water municipality, $10k to your County for transportation fees, $10k for school fees, another $10k to your city for plan reviews/approvals and inspections, etc. I haven't even included engineering costs but that's almost $60k right there.
So do you all do your own marketing for vacant Raw land via direct mail? If so once signing a purchase agreement do you all then begin the necessary tests to start the development process?
In the general real estate world (whether it's land for development, buying rental properties, etc.), some of the best deals are found off-market. So, direct mail is a great way to try and find something. And yes, once you sign the purchase agreement, start your due diligence! But be sure to leave yourself enough time in the contract to perform as much of this as you can before it's too late (i.e. prelim soils report, meeting with engineers, city planners, and municipalities, etc.).
@@landdevelopment1019 thanks for the reply. Once this stage is completed are you just selling the developed land or building on it and then selling?
You forgot the most important part, profit. Don't forget to subtract your profit from the offer price.
Juan, great point! In some cases the profit is included within the % that you deduct from the home sales price in order to reach the "finish lot value" (step #2). So if you were to deconstruct that step a little more, that's where it would be found. However, I understand that everyone is a little different, this is just how we have done it. I should've clarified that a little more because you're right. YOU DO NOT WANT TO LEAVE OUT YOUR PROFIT! Thank you for bringing that up.
@@landdevelopment1019 Thanks for clarifying.
@@landdevelopment1019 So you develop the land for free to make a profit on the home you build? Maybe I'm missing something ?