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Dannym5

Question about development process

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Hey,

I just found this forum yesterday and have found it extremely interesting, and the members seem to be quite knowledgeable about development.

I was just wondering if anyone could tell me the different stages in the development process. Its something that I've been wanting to get into but was having some trouble figuring out how to start.

I have a few ideas of how to start but I was just wondering if I could get some input from you guys(gals).

Thanks

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There is no prescribed way to go, but you should contain at least 1 of three basic things......land, money, or an ability to build something (the last one is much harder to quantify)

Step 1 - Develop an idea and do a quick determination if it financially feasible (this means look at total development/operating cost verses revenues)

Step 2 - Locate a piece of land that is compatible with your development scheme (to option the site will require about 5% of the purchase price in a non-refundable deposit) Also as part of this you will need to have soil samples done to confirm there is no contamination.

Step 3 - Hire a market analyst that will be able to project current competing supply and demand, and will confirm your assumptions (this will likely be necessary to get financing)

Step 4 - Hire a land planner to determine if the site will indeed work, and to do building and parking placement.

Step 5 - Hire an architect to provide renderings

Step 6 - If it's a complex structure you will need to hire a structural engineer.

Step 7 - Seek financing from private individuals.

Step 8 - Begin marketing the project to get pre-sale/leases

Step 9 - Seek financing from a lender (you will have needed to raise a certain level of private investment and pre-sales or leases) Additionally you will need to separate bank loans, a construction loan, and then an arrangement for permanent financing when construction is complete.

Step 10 - Purchase land if everything looks good.

Step 11 - Solicit bids from construction companies.

Step 12 - Build the thing.

Step 13 - Hire property manager.

Step 14 - Sit back and enjoy the good life.....................

Also, I should mention that you want to get an attorney and accountant involved early on.

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Hmm.... I was fairly close in my assumptions, except I overlooked 3 and 4.

but then I would have to ask how you could figure if it is financially feasible? Would that be some sort of BOE (Back of envelope) analysis formulas? Considering average rental and sales rates in the area calculated against the size of the building as well as possible uses of the buildings? I mean, to me, that seems logical.

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Yep.......land costs, all the consultant costs, and construction costs, plus interest.....then leasable square footage, times lease rate (minus concessions) times an occupancy rate.......

Then subtract operating expenses and see what kind of ratio you get

Right now it's pretty tight......if you think your early take is 8% of the total development then it's a pretty good deal.......if you can get 10% then it's phenomenal.......instutional investors right now are only expecting about 6% on some types of development.

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Well as a consultant working with developers, I've seen the process through many times, though I have not developed anything on my own......yet.

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