Part 2 – Getting Started with Residential Land Development

Part 1 of this series discussed the initial steps to getting started with residential land development. We covered financing options, finding partners, and finding properties. Part 2 will pick up where we left off and teach you 3 more steps you need to take. Because we covered 3 steps in the first article, we will number the following steps 4, 5, and 6.

4. Preliminary Due Diligence

After identifying a potential property, you will need to explore the codes, zoning regulations, and development processes for the local municipality or jurisdiction. Although you can go through the process to change the zoning or use for the property, it is typically a long and painful process that doesn’t guarantee your proposed changes will be approved. It’s ideal to keep your development conforming with existing codes and regulations.

5. Obtain Estimates For The Development

You will likely need to talk to several different contractors to get bids on the work that needs to be done. It’s wise to use contractors that have done similar projects within the area. They will have more experience working with the local city. Their experience will help them understand the requirements and costs for the project in the area. In addition to getting bids from the contractors, make sure you talk with multiple city officials multiple times. You need to make sure all of the stages of the application and approval process are covered. This process can include, but is not limited to:

  • Filling out and submitting paperwork
  • Meeting with city officials
  • Various 3rd party tests and permits
  • Purchasing water rights
  • Application fees
  • Construction inspection fees

6. Negotiation

Now you should have a good estimate on the timeline and cost to execute the development. You are ready to run numbers and make an offer to the seller. One of the keys to making an offer and negotiating is understanding if there’s any part of the development process that the seller is willing to complete. If it’s a big enough project, the seller may be willing to seller finance or subordinate the property. With the amount of information needed for a development project, it’s usually a good idea to have at least one meeting with the seller to discuss as many details as possible. Then you should present an offer that contains multiple options to make the deal happen.

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