Real estate development - Posted by Charles

Posted by Steve-DC on February 06, 2002 at 15:14:39:

Fair enough!

Note: This is all completely made up Stevespeak, take it for nothing more than a bunch of Natespeak! LOL :slight_smile:

Real estate development - Posted by Charles

Posted by Charles on February 05, 2002 at 22:51:53:

I may have an opportunity in the next two years to be the first person offered to purchase 25 acres of real estate in Oregon. Real estate agents have offered $500k to the owners in the past, yet the owners have turned down offers at this time. In my opinion, the land is worth far more if it can subdivided into residential lots (with approved zoning)with sewer, water, electric, etc. As a person inexperienced in land development, can anyone recommend resources or opinions going from start to finish on bringing such an opportunity to fruition. I can put up approximately 20% of capital needed for purchase, however, other investors will probably be needed to make this a reality. Can anyone give suggestions on where I can begin?

Thanks for your time.


Real Estate Development, Lesson # 1 - Posted by David Krulac

Posted by David Krulac on February 06, 2002 at 13:21:33:

land development is not easy and not for the beginners.
We have been doing land development for many years. It is filled with obstacles including:

road building
sidewalks & curbs
utilities, electric, gas, phone, cable
engineering costs
wetland delination
stream crossing permits
septic permits
wetland crossing permits
environmental impact studies
driveway permits
steep slope studies
erosion & sedimentation control plan
historic commission study
endangered species study

When you know what EVERY one of the above list is and what it will cost, you might be ready to do a subdivision plan.

David Krulac
Central Pennsylvania

Re: Real estate development - Posted by Nate(DC)

Posted by Nate(DC) on February 06, 2002 at 24:15:32:

If you’ve never done it before, you need to look for partners with experience even above the need for partners with money. You might want to try to joint venture with an experienced local developer if you can get the land tied up. You don’t want to learn the hard way, and if you try to do your first one alone, that will be what happens…


Re: Real Estate Development, Lesson # 1 - Posted by Skip (CA)

Posted by Skip (CA) on February 06, 2002 at 14:30:16:


Another one I encountered was a “Developer/partner” who put “our” money into another of “his” projects, that folded. We lost “our” project and “I” am still digging out from that one.


Re: Real estate development - Posted by Steve-DC

Posted by Steve-DC on February 06, 2002 at 07:23:56:

I agree with Nate,

Buying land is real estate speculation, not investment…make sure you or someone you trust know what they’re doing.

Good luck,


Real Estate partners are like… - Posted by David Krulac

Posted by David Krulac on February 06, 2002 at 16:06:07:

marriage partners, make sure you pick a good one that you can trust and “live with” for a long time.

I’ve had, key word is HAD, business partners who for one reason or another didn’t work out. One of the key indicators of a business partnership that isn’t going to work out is where one partner has all the money and the other has none. The money partner will feel that they are contributing more and that they could do the deal themselves without the non-money partner. I’ve been on both sides of that equation.

David Krulac

Re: Real estate development - Posted by Nate(DC)

Posted by Nate(DC) on February 06, 2002 at 12:29:42:


I don’t know if I’d say ALL land development is speculation - I mean, one can make a reasoned guess about sales paces based on local population growth, economic growth, etc., to determine if the deal is sized appropriately for the local market, and do enough due diligence to get comfortable with the investment. But other than that, I agree with you (not surprising since you’re agreeing with me?? :slight_smile:


Re: Real estate development - Posted by ShermanDC

Posted by ShermanDC on February 06, 2002 at 17:30:52:

Not sure I totally agree with Steve or Nate.

Buying land is like buying any other real estate investment. Meaning: You better have the end in mind before you begin; i.e. “the exit strategy”.

A Few Good Reasons for buying land:
1 - You have been at a certain real estate program (system) so long that you know your team (read: contractor, hard money lender, attorney, and broker at a minimum) and you can execute a plan where you can build the project and get it sold or leased shortly after the project is completed, and the land is one of the key components and you can get it at the right price;

2 - You have been so active in a market that a potential tenant has come to you and said, "here is my balance sheet and my cash. Would you please build me a project, and you buy the land with the tenant in tow;

3 - You have been active in the market so long, you know the land is way underpriced (due to seller’s situation that makes them motivated) and again, you have a team in place to help you evaluate properly so you minimize the downside;

4 - You know of another investor (probably a home builder, or an investor working with an end user like a gas station or restaurant) and you are going to “tie up and flip”.

Alternatively, these are two (of many)poor reasons for buying land, which definitely fall into the category of “speculation”:

a - you always wanted to be a wheeler/dealer and “feel” in your gut that you should be putting your money into land;

b - you are the “Fool” Gordon Gecko was talking about in Wall Street, and your money knows you two should have never been together in the first place, and its looking for the “back door”.

Just one guy’s opinion(s).


Re: Real estate development - Posted by Steve-DC

Posted by Steve-DC on February 06, 2002 at 13:27:08:

A reasoned guess is speculation. “Speculation” isn’t meant to sound bad, it’s just not based on comparable market data. It’s the forefront…more market making if you ask me. A piece of land is not an asset in that it doesn’t produce money until it’s improved.

I think buying land should be as reasoned as possible and I think that many successful buyers of land are successful because they inside information which makes their decision reasoned.

If for example you know of a particular commercial venue that was in the works…sports stadium, let’s say, in a major city. It won’t be completed for several years, but the warehouse space around it begins to be bought and held. Before the plans for the stadium, there wasn’t a market for the warehouse space. Some people will speculate and buy, hoping that the warehouse space, in it’s proximity to the stadium will be worth something. But it’s not now. Same goes for people who know that major roads are going to be built on the outskirts of town. There is not a market for the land around it now, but people start buying, speculating that there will be.


Re: Real estate development - Posted by Nate(DC)

Posted by Nate(DC) on February 06, 2002 at 14:46:40:

I’d draw the difference between speculation and investment at the amount of work you plan to do to produce a profit. True speculation means you buy something and hope the price will go up. If you are going to increase the value of the property (let’s say, by subdividing it, or rehabbing a house, or whatever), that’s investment. If you buy and hold with the hopes of eventually doing something to increase the value - like your example of buying raw land in the path of development to subdivide it later - well, I guess that’s a blend of both.

To use DC examples: investment is buying a vacant house to rehab it and re-sell for a profit. Speculation is buying a vacant house and letting it sit there for another 5 or 10 years in hopes that the neighborhood becomes the next Logan Circle, and I can sell it to someone that will rehab it. (Although, based on neighborhood trends, one can still make more or less informed guesses about where this might work. I.e. Eckington, maybe. Congress Heights, maybe not)

If I intend to hold it for a while and then maybe rehab it myself, I guess that’s a mix.

Note: this is all completely made-up Natespeak. No relevance to anything else is intended or assumed :slight_smile: