For those of you who don’t know, our office is located in Melbourne, Brevard County Florida.
This is the exact location where Tropical Storm Fay decided to take a bit of a rest and dump massive amounts of rain down onto the homes and businesses in this area.
Tropical Storm Fay was an extremely rare occurence. The rainwater that was seen in some areas most likely will not be seen again in my lifetime. And even though, this was such a major event, the majority of homes in the area were not damaged by the storm.
In fact, I have only heard of one location where new subdivisions received flooding damage. And the rumor is this was caused by a blocked culvert from an offsite canal and not from poor design of the stormwater system in the subdivisions.
So, how does this impact your future developments?
Well, common sense would tell you it shouldn’t. But reality often doesn’t involve common sense.
Do not be surprised when government agencies create new requirements and stricter design parameters for your developments in the future. Cities, Counties and Water Management Districts will use Fay as an opportunity to put more restrictions on development.
This will most likely result in larger stormwater treatment areas for your real estate developments. Meaning your land will have less developable area.
Less developable area means less profits.
So if you are purchasing land in the near future in Florida, be aware of any new stormwater requirements that you may need to meet.
You may want to offer less for that property.
This implementation of new requirements is not restricted to Florida. Practically every location has natural weather conditions that can create drastic changes in property development requirements.
Most likely these are issued through the building code, but as in the case of Tropical Storm Fay, these requirements will be felt in the site design.
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We get emails of development questions nearly everyday here at PropertyDevelopmentSource.com.
The questions come from all over the country, and it is clear after having read so many of them, that many of these questions are actually stopping potential development projects dead in there tracks.
Many people are simply stuck, unable to take the next step because they lack the information they need to take action.
That’s a big deal. And so we do our best to get these people the answers they need. But as much as we try to answer them, it has become obvious that many of the questions are the same. So we put together a report that covers the TOP 6 questions we received.
The result is:
“The Big 6:
Answers to Developer’s Top
Questions that Hinder Success”
This extensive report gives detailed, from the trenches, answers
to questions like;
- How do I get good cost estimates for evaluating potential
projects? - How do I get financing for my project?
- How do I hire the right team for my project and how do I
manage them - What percentage profit should a project provide to make it
worth doing? - What development fee should I charge my partners or investors?
- And finally, how do I get a reasonably accurate feasibility study without
spending thousands on consultants and reports?
And we don’t stop there. After putting together the report, we realized that unless we include the tools you need to properly answer these questions, the report is incomplete.
So we included valuable spreadsheets and checklists to help you keep making progress and taking action.
If any of these questions, or something similar is stalling your real estate development plans, please check out THE BIG 6, here
THE BIG 6: Answers to Developer’s Top Questions the Hinder Success
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Property development in the past was traditionally regulated by local cities and counties. Today more than ever, land developers need to focus their attentions and be aware of the numerous federal and state laws which protect wetlands, endangered species, forests and water resources when they are contemplating a development project. Developers must be aware that from the very beginning of the project, the process will involve obtaining land use and environmental approvals in order to successfully develop the site in an effective manner. These land development changes are here to stay.
What Factors Have Influenced Changes:
- The U.S. Army Corps of Engineers have been instrumental in creating a variety of federal and state related approvals and more restrictions that have resulted in significant costs to developers who must make the appropriate changes to comply with wetlands mitigation requirements.
- New endangered species lists and critical habitat designations are creating more government regulations and approvals. Agencies such as the U.S. Fish and Wildlife Service and National Marine Fisheries now have more mitigation authority over land development projects.
- Water issues and land development are being dramatically impacted. For instance, today all levels of government are now involved with endangered species protection and public water allocations caused by severe droughts and water shortages in certain parts of the country. Water quantity and quality are now part of the land use decision process.
Many municipalities have adopted water setback ordinances for bodies of water such as streams. There are numerous forest protection acts, erosion prevention laws and other legislation that have popped up over the last decade that are increasing laws and regulations affecting development projects. Federal agencies are issuing large fines against business entities and filing criminal actions against private individuals for violation of environmental laws. In turn, private citizens are filing lawsuits against the federal and state governments to modify regulations affecting development projects.
Natural resources are influencing how the development project will go forward or in some cases whether the project will go forward at all. Developers must understand this natural resource permitting process and how it affects their project before they begin any permitting process. The following are recommendations to understanding the process:
- Prepare in the very initial development process by identifying early any natural resource or environmental permits that may be needed by using your legal and technical development team’s resources and relying on their advice. Plan ways to avoid the natural permit process and be prepared to spend a considerable amount of time and money.
- Consider changing your project so that it will not have a significant impact on wetlands or endangered species. If this is not possible, focus on what special permits you will need and start the application process as soon as possible so that you are able to plan accordingly. Conducting species surveys is a good way to find out if there are endangered species that will be affected by the development of the site.
- Identify water issues. Make sure that you have sufficient water rights and water supply. Obtain all storm water permits and meet waste discharge requirements by applying for these permits early on. Also investigate whether nearby water sources have restriction issues and have a plan to deal with and solve those issues.
- Research and investigate local government regulations, setback provisions, water and erosion law and regulations and forest regulations.
By investigating and addressing these issues at the beginning of the project, you will be more successful in obtaining any required natural resource permits and successfully completing your project.
Many developers have been on the sidelines of late waiting for the credit crunch and property prices to stabilize. But not everyone is scared to enter this market. Many think now is the best time to buy property they have witnessed in 20 years.
A recent article in The New York Times addresses that very issue. (Sure, Land Is Cheaper. So Is It Time to Buy?)
I agree with the New York Times article that there are some great opportunities in the marketplace right now. What I fail to agree with is the approach the article seems to condone.
The article is focused on land banking instead of property development. Land banking is where you purchase a property with no intention of developing it. You simply are holding it with the hope that it will appreciate in value.
Personally, I think land banking can be much riskier than actually developing the property. With property development, you first recognize a demand for a certain product in the marketplace (office space, apartments, medical, etc.) and then you develop a piece of property to meet that demand.
With land banking, there is often no real plan of what the end strategy is going to be. That’s very risky. If you don’t have a good idea why your property is going to appreciate in value, and how and when you are going to sell and recover your return on your investment, then you are just gambling.
I have been around the development industry long enough to see how quickly permitting requirements and building codes can change. Many of these changes can have huge impacts on the value of your property.
The longer you hold an undeveloped piece of property, the greater the risk that a change in permitting, codes, or zoning will negatively impact your property.
Wouldn’t you rather get the property developed as quickly as possible and avoid such risks?
Now is the time to be looking to buy land - but only if you can develop it into a marketable product today.
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It seems nearly every city in every state is aggressively trying to grow in size these days. This can often be a golden opportunity for your property development project.
City’s are looking to grow in size by annexing land for one simple reason – tax revenue. Every parcel that is acquired or annexed by a city increases its tax base and tax revenue. It is a simple way for cities to pay for thier constantly growing services and budgets.
As a property developer, when you conduct your due diligence, it is a good idea to be aware of what cities and towns may be in close proximity to your parcel. If another city is nearby your property, you should definitely evaluate what annexation could do to the value of the raw land and the final developed project.
Through annexation your property may be able to acquire;
• a higher density zoning or even a complete change in land use
• access to beneficial services like water, sewer, mass transit, fire and rescue, or snow removal
• possible change in school districts or added leverage to initiate a change in school districts
• tax incentives (normally for large parcels and developments)
Consider these scenarios.
1. You find a piece of vacant land that does not have water and sewer available nearby and is thus priced accordingly. You put the property under contract and then talk with the nearby city to arrange for annexation and the construction of a sewer line via a fair share agreement. Before you even close on the property you have increased its value significantly.
2. You are under contract to purchase 35 acres for the development of a high density commercial and retail center (complete with a big box anchor store and major hotel chain.) During your due diligence it becomes clear that the city’s water line does not have the capacity to serve the entire site. However, the adjacent city has water service nearby that does have capacity. Rather than walk away from the project, you pursue annexation and obtain the water concurrency needed for your development.
3. You pursue rezoning of your property to allow for a higher density mix use development but are denied. However, the adjacent city’s planning and zoning board is much more in tune with your development vision and would be in favor of the project if the property was within their jurisdiction. You go through the annexation and rezoning process simultaneously (which is the norm) and get the zoning you need for your development.
It pays to explore all your options when developing land. This is often where the real profits are found. So add annexation to your due diligence checklist. It could bring your property development much bigger profits if you do.
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Thank you to everyone who took the time to enter the giveaway. Unfortunately, there can only be two winners (one grand prize and one runner up.) So without further delay, here they are.
The winner of the runner up prize - one hour of my time for consultation, evaluation, advice on land development, is Christian O’brien. Congratulations.
And now the winner of the grand prize - a land development site evaluation any time this year with an average value of $4,500, is Madrelle Arnette. Congratulations Madrelle.
(I emailed Madrelle earlier to let her know she had won and she told me that a group of her friend are starting a private school. They plan to use my services to help evaluate a site for the school. Sounds Awesome. I am glad to help.)
Once again, thanks to everyone who entered.
Bart
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One lucky person will win a $4,500 Site Evaluation Report for free.
That’s right. If you win the FREE Site Evaluation Report, myself and my partners will go through the due diligence checklist, conduct research, and create a due diligence report for a property of your choosing. And we will do it at no charge. Completely free.
Win a report for you project that looks like the free Site Evaluation Report we give away on the website. (Our clients pay us several thousands dollars to tens of thousands of dollars to perform Land Development Evaluations on their projects, so this is a pretty valuable grand prize. On average I would say this prize is worth $4,500)
Why am I doing this? Well, the other day I received an email from a member of the site saying,
“Property Development Source is the best land development resource on the web that nobody knows about – you should run a contest or something to get the word out.”
And I agree. So I am giving away thousands of dollars worth of our services in the form of a Site Evaluation Report as the grand prize in order to spread the news about our website.
But I am not going to stop there. I am also going to give away a runner up prize - an hour of my time. That hour can be spent on the phone with me answering questions or strategizing, doing research for you, or simply providing feedback on a project you are working on – it is up to you.
The way to enter for a chance to win a $4,500 Site Evaluation Report is simple. Nearly every blog post on our website has two little buttons down at the bottom of the article (Share This & Bookmark.) Those buttons allow you the reader to “social bookmark” a post to any of the major bookmarking and social websites.
Social bookmarking is a great way to get the word out about Property Development Source.com
So all you need to do to enter the contest is pick your favorite blog post or video on the website and use one of those buttons at the bottom to “bookmark” the post. Doesn’t matter what bookmarking or social site you use, just make sure you give the bookmark a proper title, description, and tags where possible.
Once you have done that simply send an email to bart@propertydevelopmentsource.com with subject heading: contest entry. In the body of the email tell me which blog post you submitted, what bookmarking or social site you submitted it to, and what your username is on that bookmarking or social site. (This will allow me to verify your entry.)
That is it. It’s that simple, takes less than 10 seconds, and your done. Should be fun.
Enter multiple times: For each blog post you bookmark and each social website you use, you can submit a new contest entry. (Limit 10 entries per person.)
To find out how you can get an additional 90 entries into the contest to win a $4,500 Due Diligence Report, please see the FAQ below.
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Otherwise, go to your favorite blog post now and start entering the contest! Good Luck.
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If entering sounds confusing, here’s a video to show you just how easy it is.
F.A.Q.
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What if I try submitting a blog post to a social site and the post has already been submitted?
Most social bookmarking sites allow you to “digg” or “vote” for a post that is already submitted. Simply vote for the existing submission and send me an email telling me about and you will be entered. No problem.
How many times can I enter?
You are allowed to enter the contest by social bookmarking blog posts up to ten times to increase your odds of winning the grand prize. (But there are other ways to enter as well.)
What are the other ways to enter?
1) a few of the videos on PropertyDevelopmentSource.com can be found on video websites like revver.com, livevideo.com, and Google Video and youtube. Go to those video websites and social bookmark the PropertyDevelopmentSource videos you find there. Send me an email just like you would do above and explain what you have done and it will be another contest entry (Limit 10)
2) If you have a website you can get 10 contest entries in one easy step. Simply write at least a 3 line description about PropertyDevelopmentSource.com on your website and include a link to our site in the description. (Links can be to the main web url or to a particular blog post – it doesn’t matter they just need to be working links and can’t be “no follow”.) Send an email to bart@propertydevelopmentsource.com with the subject heading: contest entry and give the url of where the link is located and your done. 10 chances to win will be yours.
When does the contest end?
I will draw the winners on my birthday, April 2nd and announce the winners the next day.
I don’t have a project right now, how long do I have to use the prize?
You can claim your prize at any time in 2008. Simply send us the property description by December 31, 2008 and we will get started on your report.
For the official contest rules, go here.
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As a developer, you are required to make hundreds of choices over the course of a development project. From what architect to hire, to how much to spend on landscaping, to what price to sell your end product, the developer makes countless decisions every step of the way.
The stress of these decisions can build up fast. One thing that may help you eliminate some of the stress, clear your head and help you make better choices is to understand what you are really doing when you make these decisions – choosing whether to buy down risk or not.
A story will help explain this better:
A few years ago, my father was developing a subdivision of single family homes. They were in the very early stages of the project and he had hired a geotechnical firm to take some soil borings for use in designing the roads and the storm water detention pond for the project.
The geotechnical firm had put together a proposal for the bare minimum of soil borings – a few for the road and just one for the detention pond. The price was right and so my father gave them the go ahead.
The geotech firm conducted the soil analysis and found sand or sand with traces of clay from the top soil to down well below the water table.
No surprise there as sand is common throughout most of Florida. So the engineer went about designing the road and stormwater pond for sandy soils and the project moved ahead as planned.
It wasn’t until they were nearing the end of construction that problems started showing up with the stormwater pond. The engineer had designed a dry pond for the subdivision. (A dry pond has no water in it except during storm events where it fills up with water and then the water percolates into the ground over time. Usually within 3 days the pond should be dry again.)
Well, the subdivision had experienced a good rain storm about a week prior and the pond was still full of water. It hadn’t drained like it should have. Then another rain storm came and the pond was overflowing and water was flooding some of the new lots.
Quickly my father was on the phone with his engineer. And shortly after the engineer visited the site, he was on the phone with the geotech firm.
Long story short – the geotech firm ended up taking some more soil borings and discovering that the pond had been located over a significant layer of clay soils. The initial, single boring in the pond area had just missed it.
The stormwater pond had to be redesigned and reconstructed resulting in tens of thousands of dollars in additional costs and project delays.
Looking back, my father realized that he had made a poor decision when choosing to go with the bare bones geotech analysis that was proposed.
He had subconsciously made the decision to take on more risk for the hope of increased profit. If he had taken the time to consciously look at that decision as one about risk, he would have made a different choice.
You see the majority of costs for hiring a geotechnical analysis is in the mobilization of the equipment. Once you have paid to get the boring equipment to your project site, the cost of an extra soil boring or two is minimal - usually a few hundred dollars.
The risk my father chose to take was a significantly greater uncertainty about the geotechnical features of the property. And he exchanged that risk for the chance of only a few hundred dollars extra in profits.
If only he had looked at the decision from the standpoint of risk, he would have seen the bargain in paying only a few hundred dollars to buy down his risk significantly.
He learned the lesson the hard way. Hopefully, you won’t have to.
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The feedback I have been getting via emails lately has been great - lots of great questions.
What is most exciting is some of you have written with actual property information and requests for help with analysis and development planning. My partners and I are trying to set aside as much time as we can to help those who write in or submit comments. It’s really a win-win. You get help with an actual project and we get a better understanding of what areas people new to property development are most in need of assistance. So keep ‘em coming.
One question we have received multiple times is a request for financial software or spreadsheets.
In response, I have cleaned up a spreadsheet that I use personally for property development analysis.
The spreadsheet certainly isn’t the most complicated one I have, but it is better than many I have seen. I think it works great for many standard development projects and I think once you see it you will agree.
I am including the spreadsheet with THE BIG 6 report.
Go here to learn more about that great report and get your hands on the spreadsheet.
THE BIG 6: Answers to Developer’s Top Questions that Hinder Success
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There are many different real estate websites/magazines out there that have email newsletters. A few of them even deal with property development, if only sparingly. None of these e-zines focus on the “how-to” of land development. They are geared toward news, market research and trends in the industry and are heavily weighted to commercial projects. (If you know a good residential development e-zine please let me know.)
Here is a list of a couple that I have found worth signing up for. Keep in mind, 90% of the time I simply scan the headlines and hit delete. And often, I will let them pile up for a week or two and then run through all of them in one go. The headlines are good for getting a general feel of the state of various development sectors and regions of the country - which is really all I am after.
And when I do find a headline that makes me dig deeper and actually read the article – I consider it gravy. So here they are.
http://nreionline.com/ National Real Estate Investor Online: There free print magazine is excellent and their ezines are good too. NREI has a bunch of sister sites, so whatever you are interested you should be able to find a match here.
http://retailtrafficmag.com/ Retail Traffic Online: One of the sister sites from above. Some good insights can be found here if you are in any way interested in retail real estate.
http://www.smartbrief.com/icsc/index.jsp ICSC.org SmartBrief This is run by the International Council of Shopping Centers.
http://www.realestatejournal.com Subsection of the Wall Street Journal. The residential side is geared more toward individual home buyers it seems, but the commercial side is worth checking out. On a side note, there website has this cost calculator that is fun to play with but I wouldn’t base a project on it.
Please, submit the e-zines you subscribe to in the comments below. I would love to hear what you find valuable.
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