vacant land development

General Real Estate Investing
1

I want to thank everyone on this web site! I’m learning more than I learned in the boot camp or other seminars I’ve taken.

My question is this: I found a 10 acre vacant land. Next door SF homes are being built by a developer.

This vacant land that I’m interested in has not been subdivided, etc. It’s just a 10 acre piece of land.

I do have a friend that is a builder. What’s my first step, if I was to acquire these 10 acres?

  1. Turn it over to the builder friend to proceed with an engineer to get it subdivided into lots?

  2. Find my own engineer to do that? or what??

  3. What is the estimated time (approximately), once the land is under contract and purchased, to get it approved for lots and ready for construction?

  4. Can someone give me the 1,2,3’s steps from purchase of land to ready for construction?

Thanks again for all your help!!

2

Before any of that you need a finance plan.

While residential real estate may be about location, location, location…investment real estate is about finance, finance, finance.

3

Can you or anyone else that knows give me more detail as to what the financing options are?

After the financing, or while that’s being done, what are the next steps? Engineer and survey, permits, architect???

In other words, if someone has already completed developments could tell me what would be the entire steps from start to ready to build stage, for SF homes.

Thanks again for any info!!

4

Most lenders will loan up to 80% of total cost (acquisition + construction); not to exceed 65% of completed value.

5

Thank you for the financing info.

Do you have any feedback on my other question, as to the other steps?

6

If it smells like a deal put it under contract. Then find out how many houses the current zoning allows. You’ll have to hire an engineer to draw site plans and get building permits etc. You should probably get an environmental inspection also to check for poisons and of course you need to make sure title is clear. If you find out the city is prodevelopment… you may want to put it under contract contingent upon rezoning for apartments or industrial use and that alone could triple the value of the property without even building anything.

7

Excellent advice!! Thanks so much!!

:o

8

Others can correct me if im wrong but from what ive experienced and been able to offer clients, lenders like to see that final maps are completed if they will be lending up to 80% on the land and 80% for construction(spec). If its raw land then 50% on the land and the same 80% for construction.

And up to 100% on construction portion with presales.

9

I’m not sure if I’m asking this the right way, but if the plan is to purchase the land and then build (or presale), and this is presented to the lender with a complete plan (zoning, permits, architect, etc), can’t the lender agree to the 80% or 100% (presale) for land acquisition and construction in one loan?

Instead of what Zachj suggests that the lender separates land (loan of 50%) from construction ( loan of 80%).
???

10

Well whats wrong with having seperate loans? You would be better off, its still with the same lender but the construction portion will be on line of credit so your only being charged interest on the draw amount only and not the whole loan.

11

Oh now I think the concept is sinking in.

It doesn’t matter how the loan is structured, it’s still a draw and you decide what part to use for the land, and what part for the construction???

Or does it also depend on the lender?

12

one fixed loan to take down the land, then seperate loan as a line of credit for the construction portion. that’s the best way ive seen it done, but im sure it can be structured many ways depending on the lender…

13

Based on most loans you’ve seenstructured for land, Zach, it’s 50% for land, and 80% for construction, as a draw.

So is it logical to follow the steps below from first finding the vacant land? Sorry guys, for sounding so dumb, but I’m familiar with multifam. and SF, but not land:

  1. put land under contract with contingencies
  2. check with engineer and builder for feasability of what you want to do with land
  3. At the same time, start contacting lenders for financing options

How does that sound?

Or is it better to wait until you’ve made some initial enquiries and had reports from engineer before approaching lender?

14

well if you can put 50%down on the land go for it. But you can get up to an 80% loan on the land if you have final maps. Final maps can take a bit of time though as I know because I used to be the civil engineer creating the tentative maps and going for county approvals etc… feel free to email me with questions…