new construction

[kaimera]

I've noticed not too many people are not interested in new constructions here. Are my wrong but this is true?

Also, I just came across a couple of properties located next to each other. The plots of land are bigger than normal and would be a nice fit for a bunch of townhouses.

The area is zoned as R3 and im not sure if this would be possible to do here. But I can find out that info but would like you guys to shed some light on new constructions like these. How should I go about the financing. I know i have to get a construction loan but I also plan on selling all the units before even built. These are just some thoughts. any other ideas or advice?

[Dan Auito]

Just some preliminary thoughts before everyone gets into this Kaimera. Are the lots for sale? Are they priced right? I would check with planning and zoning first thing to see if they would be allowed.

Does the area in question seem as though it would support this type of project with a sellout before completion?

This is definitely a commercial project so a minimum of 30% upfront money is often traditionally required, a site survey, preliminary approvals from planning and zoning, a set of prints and cost estimates for the project. An appraisal based on the plans to substantiate value of project once completed.

Comparative Market Analysis and supply and demand statistics would help to justify an accurate forecast of potential sales prices and market buyout timelines of the project.

A feasibility study in other words! What is the going rate for new construction in your area per square foot and how many total square feet will your project be? Charley Brunken can probably add some insights here as well as others, folks feel free to chime in! :SM134:

[CharleyB]

We deal with new construction every day for our clients so here's some thoughts in addition to those put forth by brother Dan.
If indeed the property(s) is for sale the first action is the Zoning Office. An R3 designation can mean different things in different jurisdictions. The maximum allowable density for this disignation will be critical. Density is the number of units allowed per acre. To be profitable in townhouse construction that density will need to be high in order to reduce the land cost per unit.
If a petition for a zoning change is required to increase the allowable density you may want to walk away unless you have deep pockets. This process can be time consuming and expensive because you are dealing with local politics.
Also, townhouse construction can be expensive in that the infrastructure costs per unit can be high because of site constraints. i.e.: sanitary sewer, gas, parking, storm drains, detention ponds, acel/decel lanes, tot lots, etc.
These type of projects are typically undertaken by heavy hitters.
However, that being said, you may attempt to do the leg work and some simple preliminary planning and option the property. Then you can sell your plan to a "heavy hitter" for their development for a fee. Do your homework and be well prepared before you present your proposal to a multi-family builder/developer as they are usually very sofisticated players.
I'm not trying to thwart your enthusiasm here, for-warned is for-armed.
All the Best,
CharleyB
www.rockyfordinternational.net

[Peter Forest]

The information you sent was very informative but I’d like to add just a little more. Depending on your credit you may be able to purchase the lots for 10% down then use the lots as collateral for the construction loan. Since you plan to sell before completion, the project can be very affordable if your calculations are precise. One mistake and you can lose your shirt so if ur not experienced with construction stay away. In the world of construction 98% of the time something unexpected will occur, especially if your not familiar with the construction company. With that being said, if you get an adrenaline rush from the risk involved (like I do) with deals such as these then go for it.

In my personal opinion, as long as the financial calculations are estimated correctly based on the worst case scenario and you still have a substantial profit to make then it sounds like a good investment. :SM083: