Land Development Startup

[ErnestGoesToWSOP]

Hi Godson,

Sounds like you have an awesome project going on. I would recomend you and your family getting as much education on the subject as possible. There are some good land development seminars out there, most notably by Scott Scheel at creativecommercialrealestate.com. There are also websites for real estate investors, reiclub.com, richdad.com

There are some areas where buying land can be a good buy right now. About 2 hours from you in the high desert, Victorville, Hesperia and Apple Valley will see another population explosion in the next 3 years due to the expansion of the SCLA and the jobs that will come with that. A lot of the developers and investors clients at my company are picking up land based on the poplation projections.

Does your family have development experience? If not, partnering might be good idea for bigger unfamiliar projects.

[majesty2009]

I think townhomes are the way to go right now. The apartment conversion/small condo projects around SD are dieing out. The market for them is way overcrowded, but a project like this should be pretty sucessful. How much are you planning on selling each unit. Mine are going to be priced at $500K in El Cajon so I imagine that you will be able to sell them significantly higher in Carlsbad.

[spex x]

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IMO, it would be better to start slower and work from there. Build and sell two, build and sell two more. Once you've got some more experience you might start thinking about buying 4 or 5 properties at a time. But frankly, there is not shortage of good deals in real estate, so there is no reason to rush.

My understanding is that investing in raw land is one of the most risky of RE investments. So that's another advantage to taking it slow. You are risking much less all at once. BR management.

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nice post, thanks for the great advice, that is the thing im not sure where to start once im finished with this project, im wondering if its better to start building/buying land is a specific city/town or just find various vacant land lots in diff. locations in good areas.

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It seems to me that if your projects are concentrated in a particular area, you'll have a much easier time managing them. I think that this is what I'd do until I developed a better feel for the business. Also, the more you build the more contacts you will develop that can help you when you want to branch out into different areas.

I guess my general advice would be to be very careful and conservative. IMO, RE development is a field that is very lucrative but also very risky. And its my observation that its pretty easy to get overextended cashflow-wise in RE development. I'd take it very slowly. Probably I'd concentrate on one locale building a few homes at a time. Build up slowly and do quality work. Develop relationships w/ contractors, bankers, etc. Then once you've got a reputation and experience, start to branch out. Even if concentrating you efforts to a smaller local will create a smaller bottom line for you, its still worth it. Its just easy to bite off more than you can chew in this field. One or two million isn't that much money in RE development. You don't want to end up broke w/ 10 unfinished houses rotting away.

You want the last buck not the fast buck.