Land Development Startup

Godson · #1 03-31-2007, 08:32 AM

Quick question for the ballas in this forum. My family has a property located in Carlsbad, CA. 6,300 Sq. Ft. land value of $395,000.00. We are looking to build 2 townhomes on this property and sell them for a reasonable price. The plans are close to being approved by the city and construction to begin shortly.

With this being said, say we profit a cool $800-900k from this project and want to startup a land development company with this money. What would be the best way to start? buy another piece of land with about 80% of the bankroll, or buy 4-5 properties. Any advice you guys have is appreciated, also if anyone works for a company like this or does this for a living please pm me or respond here with any helpfull advice. The housing market is down in California, but I hear right now is a great time to buy land cheap and in a couple years it is supposed to be picking back up. anyways ill write more later but its 5 am and i cant really think straight. thanks fellas.

JacKnight21 · #2 03-31-2007, 11:46 PM

2 townhomes on 7000 sqft parcel profit of 450K per townhome if you can do this just repeat this as many times as you can. Even if your including the 400k property as profit. 250K profit per townhome is juicy even in the 1m-1.5mil price range.

Emperor · #3 04-01-2007, 01:21 AM

The problem you will have in California is getting everything approved to build a building. I know people who wanted to build 1 house on a large lot in the middle of nowhere in SLO county and it took close to five years to get everything approved. Butterfly studies, Tree growth studies, Water Table studies, etc. etc.

Also with as little cash as you will have, you need to do these one at a time Id think. Carrying costs can eat up any profit and leave you in a cashflow crunch if you end up holding the property for any time. I know it is California, but even cheap million dollar homes take awhile to sell sometimes.

I know a couple of other builders who tried building spec homes in different areas. First time they had to hold a house for 6-12 months to get it sold, they went back to contractor work because of the stress.

spex x · #4 04-02-2007, 11:37 AM

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.

Godson · #5 04-03-2007, 07:13 PM

[ QUOTE ]
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.

[/ QUOTE ]

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.

ncskiier · #6 04-03-2007, 07:19 PM

Godson-
you've got to email me the original of your avatar, I've got to see it full size.

majesty2009 · #7 04-03-2007, 07:35 PM

[ QUOTE ]
The problem you will have in California is getting everything approved to build a building. I know people who wanted to build 1 house on a large lot in the middle of nowhere in SLO county and it took close to five years to get everything approved. Butterfly studies, Tree growth studies, Water Table studies, etc. etc.

Also with as little cash as you will have, you need to do these one at a time Id think. Carrying costs can eat up any profit and leave you in a cashflow crunch if you end up holding the property for any time. I know it is California, but even cheap million dollar homes take awhile to sell sometimes.

I know a couple of other builders who tried building spec homes in different areas. First time they had to hold a house for 6-12 months to get it sold, they went back to contractor work because of the stress.

[/ QUOTE ]

You should have no problem getting this approved in Carlsbad. I currently have a project going to put 6 units on an acre of land in El Cajon. San Diego is encouraging affordable housing and it should go right threw. Appartment conversion is slow but what your talking about should be no problem.

Grasshopp3r · #8 04-04-2007, 12:40 AM

I am an appraiser in Colorado and I have lots of experience with land development. I would advise you to find some partners if you are new to the business. There are many things that can go wrong with land development. Likewise, there are plenty of opportunities. PM me if you would like to talk.

Esection · #9 04-04-2007, 12:42 AM

it was my understanding that land never depreciates. am i totally wrong here, or is there some truth to this statement?

elus2 · #10 04-04-2007, 05:44 AM

[ QUOTE ]
it was my understanding that land never depreciates. am i totally wrong here, or is there some truth to this statement?

[/ QUOTE ]

Sometimes it goes up, sometimes it goes down. Take for instance the following graphic take from here

Note the dip in real prices the last few months of 1982 and at the start of 1991.