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Hey guys,
Trying to get my development company off the ground with my very first deal and would love some things to lookout for to avoid "noob" mistakes. If any experienced developers like @SteveO , @JScott , @MetalGear could provide some guidance, advice, mistakes to avoid, etc. it would be greatly appreciated as it's not a small deal.
I'm in Canada by the way.
I've done a quick "back-of-the-napkin" analysis below:
Deal:
Bungalow on incredible premium lot in prestigious neighbourhood.
Asking Price: $1,598,000
Total lot size: 22,776 sqft
Total buildable Square Footage: 9110.4 sqft (40% FAR)
Reductions to Total buildable: 500 sqft
Final Total buildable: 8610.4 sqft
Build costs per sqft (average): $175 sqft
Build cost: $1,506,820
Total Build cost: $3,104,820
Sales price per square foot - high: $550
Sales price per square foot - low: $400
Sales price - high: $4,735,720
Sales price - low: $3,444,160
Realtor fees: ~5%
Potential Gain (high price per sqft): $1,630,900
Potential Gain (low price per sqft): $339,340
I will be putting 5% of the total purchase price down, my financial partner will be putting up 15% + construction costs. He will be getting a 6% return on his cash before we split the profits 65% (money)/35% (developer - me).
I know it's overly simplified, but what else should I be looking at? Have I missed anything crucial? The sales price will be negotiated. But let's assume full ask.
One of my main concerns is that this will potentially be one of the first redevelopments in this street. The house to the left, to the right, in front, are all old homes (50+ years). Will that stop me from getting a high asking price assuming the buyer will be surrounded by old homes. I personally would not like buying a $3 million+ house surrounded by 50+ year homes.
Trying to get my development company off the ground with my very first deal and would love some things to lookout for to avoid "noob" mistakes. If any experienced developers like @SteveO , @JScott , @MetalGear could provide some guidance, advice, mistakes to avoid, etc. it would be greatly appreciated as it's not a small deal.
I'm in Canada by the way.
I've done a quick "back-of-the-napkin" analysis below:
Deal:
Bungalow on incredible premium lot in prestigious neighbourhood.
Asking Price: $1,598,000
Total lot size: 22,776 sqft
Total buildable Square Footage: 9110.4 sqft (40% FAR)
Reductions to Total buildable: 500 sqft
Final Total buildable: 8610.4 sqft
Build costs per sqft (average): $175 sqft
Build cost: $1,506,820
Total Build cost: $3,104,820
Sales price per square foot - high: $550
Sales price per square foot - low: $400
Sales price - high: $4,735,720
Sales price - low: $3,444,160
Realtor fees: ~5%
Potential Gain (high price per sqft): $1,630,900
Potential Gain (low price per sqft): $339,340
I will be putting 5% of the total purchase price down, my financial partner will be putting up 15% + construction costs. He will be getting a 6% return on his cash before we split the profits 65% (money)/35% (developer - me).
I know it's overly simplified, but what else should I be looking at? Have I missed anything crucial? The sales price will be negotiated. But let's assume full ask.
One of my main concerns is that this will potentially be one of the first redevelopments in this street. The house to the left, to the right, in front, are all old homes (50+ years). Will that stop me from getting a high asking price assuming the buyer will be surrounded by old homes. I personally would not like buying a $3 million+ house surrounded by 50+ year homes.
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