Residential development advice needed - Posted by Eric

Posted by Matthew Giegrich on May 29, 2004 at 13:04:51:

My first piece of advice is to advertise for a partner in order to have the available capital and experience to do your project. next I would say visit and look it over for helpful ideas on the new revolution in home building. the founder and Patent holder Len Terry is also an accomplished CFO in the construction industry for over 30 yrs and he could offer some very helpful insight or possibly be a consultant. I have built several duplexes and small communities of multifamily using his advice.

Residential development advice needed - Posted by Eric

Posted by Eric on May 28, 2004 at 16:29:34:

Residential development advice needed

I?m new to REI, and have been researching it for a few years. I planned to start small, but an opportunity has presented itself that I would like to take advantage of. I live in an upscale neighborhood (250k to 4 million dollar homes). My house backs up to a piece of undeveloped land (10 acres). This is a heavily wooded piece of property with frontage to a medium traffic city street (opposite side of the property). I would love to simply buy a small piece that touches the back of my land, however the owner is not willing to sub-divide. The only way I can buy a piece is to buy the entire tract and develop a small neighborhood, which I am willing to do, if the numbers are good.

I understand the first thing I will need is a civil engineer to plan the neighborhood, what is a reasonable cost for that?

What can I expect to pay for utilities (water, sewage, gas, electric, cable, and phone) for say 26 lots?

I am planning roughly 30,000 sqf of concrete for the street (single street running down the center with a cul-de-sac at the end), what?s a good price per sqft for something like this?

I know there are many other minor costs, like attorney?s fees, etc. I am just looking for the ?major? factors to see if I should pursue this land.

The land is just a bit over priced (650k), but I am fairly certain that I can buy it for 600ish.

Now, purchasing the land with 20% down will eat up most of my available cash, are there some creative financing options out there to finance the improvements to the land?

The land is in a very desirable location, there are million dollar plus homes on either side (two homes on 5-10 acre tracks of land) with my neighborhood backing up to it. This is in a suburb of Houston, with typical lot prices of around 50k.

I?m not trying to make a killing on my first deal or anything; I?d be fine with 100k profit and ½ acre of land.

Am I trying to bite off more than I can chew? I know there is a lot more to residential development than what I have listed. I just want to know if the land + major expenses will kill the deal before I invest time and money in the engineer. Any advice/help would be appreciated.