Board Topic: Developer goals - Becoming a developer in south florida
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Developer goals

Posted by: STEVE@AMD-3D.COM Oct 20 2004, 10:45 AM
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I have read The article on Real estate Developement. Ever since College,I have a great deal of interest in this area. I have worked in Architecture for 5 yrs. I have started a small drafting business, in January 2004. It seems to be going in the right direction. My main goal, is to become a successful Multi family Residential Developer. I Have done some very dumb things in my short time on this earth. I have come to the understanding that every thing must follow a set order to be successful. Righ now, I am looking for an example, a template a real life company or person to mimic. Or even a step by step layout to place me in the right direction. What ever you do please don't mention Donald Trump.
Thanks for your time
Steve D

Posted by: loanuniverse Oct 20 2004, 11:45 AM
Steve D:

Donít worry about it Steve, I wonít mention Donald Trump as an example to follow. First, I donít think that the United States is big enough for more than one of those characters, and second because Donald is more of a self-marketer than a Developer.

The problem is that I can not give you a name or a company that you can follow and try to model yourself after them because the great majority of successful developers are private and their reputation is local. I am not talking about the big guys here such as ďWCI, Lennar, Toll Brothers, Beazer, M/I Homes or the likeĒ, I am talking about the small to medium guy that might have 100 units in its backlog. Once you get past the big companies with multi-state operations, developing gets very local.

In addition, you are talking multi-family instead of single-family. I would have to say that in this area of developing the market is even more segmented. Looking beyond the large condominium towers, you start talking about apartment buildings that are mostly built by small investors.

To give you an idea of how local development is, I work in a county where the majority of the population is hispanic and the economy is driven by this segment of the population. I have had the opportunity to work on deals involving dozens of developers in this market that are very successful {think personal financial statements reflecting $20 million and up in net worth, and houses worth $3 to $5 million}. Most of these guys have done it without developing a single project out of this county, and they might be unknown to people in the next major city that is only thirty miles away.

As someone working for a lender, I get to see their financial condition, their resume, the projects that they have worked on, I get information from other bank employees about past experiences, I get to pull their personal credit report, and I can even pull a credit report on their company if I want. I just donít see anyone being able to model themselves after someone without access to that information. On top of that, you are talking about modeling yourself after someone, but chances are the opportunities that you face will not be the same that they faced. Frankly, knowing what I know about the real estate in my market, I would not mind going back ten years and buying land in a few choice locations, but today I can only make educated guesses about a possible real estate bubble in some parts of my market.

I always tell people interested on real estate development that buying something already built is a less risky way to get into real estate, but then again one can not separate risk from reward. If you are really interested, I would suggest that you start small and entice a lender by offering them great loan-to-value so that they can mitigate your lack of experience. Your resources and knowledge will determine how small you need to start. I think that even if you breakeven in the first couple of projects, they will give you invaluable experience.

Good luck

Posted by: STEVE@AMD-3D.COM Oct 20 2004, 12:10 PM
Thanks for your quick responce. I guess a small duplex or townhouse is the best first step. I will Keep my eyes and ears open for an affordable lot and start from there. Buy it get it approved from Zoning and move on. I plan on designing and buliding something anything before too long. It is somthing that I really enjoy. Taking a project beyond the conceptual stage and on to the production stage.... I think it's more fun than you can shake a stick at. I live and work in plantation and I come across many different types of people. Some educated and some not, they are all get into the market. I thick I can do it better.
Thanks again for your time
Steve D.

Posted by: Newcomer Oct 20 2004, 04:40 PM
Steve,

My situation is very simular to yours. I'm co-owner in a business and realize that real success is based on sound planning and a solid idea. I would enjoy speaking with you about your multifamily goals. Like yourself I realize the large wealth building potential of developing/owning multifamily properties. I've spent my free time in the last year making countless phone calls, reading books, and even offering my services as an understudy to several large developers in my area.

For the most part I've come up with this conclusion. Developers are either in two classifications.

1. Either way to large to even care, help, or offer wisdom. The best you'll get is talking to their secretary. After all, their probably older guys who have spend their lives learning how to become wealthy and making their own mistakes. Why should they give us their hard earned knowledge for free?

2. Smaller developers who are still hustling for a deal. They have no reason to help us because it takes money and time from their mouths.

Looking at it from that perspective I cant really blame them. I've had alot of people ask me to show them how to make money, but honestly if they havent figured *some* parts of it out on their own, why should I help them? After all, I'm still learning myself.

I've made alot of mistakes just like any buisiness owner, but I'm still going to keep my ear to the ground for a mentor. If you find one it's like printing money. However, there are some basics out there that admin pointed out which make sense. Starting with a few smaller projects first is ideal. Establishing a relationship with a bank and showing them that they can count on you to make the payments, have a sound business model, etc. After you've done a couple deals I don't think it's nearly as hard to obtain financing and support. After all, people love to talk and share ideas with people they feel are on the same wavelength or status. People love successful people. The more (and larger) deals you do with a bank the more you'll reach the ranks of *preferred* status and get special treatment and favors.

Anyhow, just my thoughts. I'm in a nearly identical situation as yourself with regards to multifamily. I am about 12-14 months until my first purchase, which I'd like to be around 1MM. The plan is to start with an established multifamily property to ease me into the marketplace. After the first couple purchases I'll be better suited to take more risk. I'm in the process of cleaning up credit scores and obtaining down payment money.

I'm open to sharing ideas and can recommend several good books for multifamily.

Possibly we can learn together, although in different areas.


-Newcomer
joshuaandrews@gmail.com

Posted by: STEVE@AMD-3D.COM Oct 21 2004, 06:17 AM
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Hello joshua,
I am Sorry that i didnot reply to your post sooner. I am running a small design firm and have many hats. I think that your well on your way to becoming very successful. I have spoken to some developers that I have worked for. You are soooo correct in your assement of the two types. I have contacted the banks and they referred me to the s.b.a. for a mentor. The S.B.A has a mentoring program and it's free. Just fill out request form and they will hook you up with a retired person in your field of interest. I have tryed that and got some mixed reviews about it. By all means give that a shot, its still a good program.
As for me I am looking to put together a good proposal. I 've got the plans for me that's the easy part. I need numbers and multi family project that was recently done before to show the possible returns. do you have any ideas?
Steve D

Posted by: loanuniverse Oct 21 2004, 09:01 AM
Steve: A duplex sounds like a good place to start. Looking for land or an old house that can be torn down would be the first step. Getting an idea of the costs of building the actual project {keeping it cheap, but marketable} would be something to do at the same time or immediately after. Donít forget that you are going to need a GC that you can trust, and you can get an idea of how much similar properties are going for by accessing the realtor listings as well as county records for recent sales.

Joshua: You might want to go after a smaller property than one worth $1MM. I donít know your financial situation, but there are opportunities that will require less of an investment and will allow you to spread the risk around.

Good luck to the both of you.

Posted by: Newcomer Oct 21 2004, 06:08 PM
Hi guys,

Thanks for the advice Admin. As I mentioned credit scores arent there yet, so there's alot to take care of before the first deal. It's possible that I may have to start smaller because of the initial money outlayed in the downpayment.

Steve, I think you're already ahead of the game because of the field your in. Have you thought of just buying an exhisting property? Something with good cashflow, solid financials and rent records. (low vacancy rates are nice). One thing you might want to consider. Even though your taking less perceived risk when building a smaller structure like a duplex, what happens if a tenant leaves? You'll have to foot most of the mortgage payment out of your own pocket. This is not true for larger properties like an 8 plex and up. You can lose a several tenants and still make your payments just fine.

Think of these things as buying income streams, or creating them if your developing. Ultimately I want to develop, but there's alot of risk involved if you havent managed a property before. Especially for guys in our situation with no track record of success in this venue.

I'm going to take a look at the sba mentor program. Could be something valuable there. I'd like to stay in touch with you and share experiences.

Send me your email.
joshuaandrews@at@gmail.com


-Newcomer








Posted by: STEVE@AMD-3D.COM Oct 22 2004, 06:39 AM
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Thank you all. The Need For an G.C. ye s that is a good idea. No disrespect, they are a dime a dozen. I am working on Getting my own G.C. license. That is the logical route for me. To be the designer and builder of my very own projects. As for boarders, I believe that you new calculate 100% occupancy.
This might be a very simple plan and missing some key elements but here goes.

1. a 1 acre lot can cost about 37k-47k high impact area (average house hold income 30-50k)
2. the lot via design can yield 1 to 2 pods of 3 or 4 story town houses (4-8 units per pod)
3. average cost for construction 70 to 80 per sf. (basic build)
4. average cost per unit in a low - mod. income area 90-150 per unit
5. average mark-up for local G.C. Subbing all work 20-35%
6. average sales price per sf. for low to mod, townhouse (not clear)1500 sf town house

I need an accountant and a costruction estimator. As we can all see that my number are like swis cheese full of holes. However as a whole I am on to something. I have worked with some developers that purchased a 1 acre lot for 75k and is placing 1 pod of (8) and 1 pool and clubhouse. 3 bed 3 stories 500k ea. and up. This gut was far from a expert at this he per sold 45% in 75 days

Posted by: Rick Oct 22 2004, 07:43 AM
Steve,

As I read through your first post a name popped into my head for a local (my local being Nova Scotia, Canada) real estate developer, with a global reach, with a fairly interesting story behind his success - Richard Homburg (Homburg Invetments. TSX ticker: HII). He came to Canada 30 years ago with pretty much nothing, started an inport / export business, reinvested his profits into real estate. While a small company on the global scale, with assets of $250 million, he has a pretty decent (realizable) story with out the Donald Trump self promotion BS! If interested you should be able to find several links with a google search.

Cheers,

rick

Posted by: Guest Oct 22 2004, 10:55 AM
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Rick
Thanks for the info. I will be looking into this person as soon as I get some free time I have more Clients to meet and budgets to work out.
Steve
email

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