Real estate development...

[phlgirl]

Very cool! Congrats on the progress.

We just bought our first peice of land (happens to be a house on it). We will be knocking down the existing structure and building our first house from scratch.

While we have plenty of experience rehabbing, this venture will provide lots of new learnings, I am sure.

Super excited and a little nervous!

 

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[djs13]

hatterasguy, how have you been doing? I just found this thread and found it to be extremely interesting. RE development isn't mentioned alot in this community but it seems to be lucrative. Would you recommend any RE development-specific books for someone who knows about real estate but never did developing?

 

[hatterasguy]

djs13 nice to hear from ya! Hope everything is going well with your endeavors!

Unfortunately I can't recommend any really good books on development since I haven't read any. Its an interesting subject which I enjoy but it doesn't seem to be really written about. Its hard to get into since it requires a lot of capital and knowledge. IMHO its not really a good beginners area of RE. Also its very easy to lose a lot of money doing it.

OTOH the profits are quite good, my business should make $1.2M off the above mentioned project in the next 12 months. IMHO that's simply OK in this business.

 

[xmartel]

Great to hear things have gone so well for you hatteras. Any new developments lately?

I wish there was more literature and threads on RE deals like this as this is what I'm getting into. I'm currently flipping my second home getting some more experience and contacts before I get into new home construction and eventually land development.

The market where I am is stupid right now with the amount of development that's going on, I can't wait to get a piece of the pie. I'll probably take the winter to get my affairs in order as well as possibly flip a third house before starting construction in spring. I think the hardest part is going to be acquiring a lot. Most are snapped up by the bigger boys and us little guys have trouble getting them.

I've heard from guys in the business that in our city a $350k house will net you $100k profit, a $550k house will net $200k. I don't even now what the $1.25m houses would net but I can imagine it'd be pretty juicy. Not to bad for four months of "work".

The big barrier is knowledge and capital. Hopefully I'm gaining the knowledge I need, and as far as capital goes thankfully my wife, years before I even knew her, built a new home before a boom hit here and the house subsequently doubled in price. Her working her butt off to pay off the mortgage, and me walking away from a house I owned with a pile of cash allowed us to pay it off completely. We took out a line of credit on it and so it's been great. I don't have to go to the bank or any other lenders whenever I start a new project. I can just use my LOC at my discretion.

Hopefully we can keep this great thread running and learn from each other, there really doesn't seem to be many of us on this site.

 

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[To The Top]

hatterasguy, I live in Aus and am very keen to start property developing eventually sub divisions and have been researching for the last couple of years. I ve been around civil so i know earthworks,storm etc and i have mates in various trades who would do work for me. My biggest question is getting finance. How do you find private lenders?? Can you get %100 loans, if the loan is only for the short term with fair returns?? Finance has been my biggest hurdle, especially when the ex got majority out of my pocket. lol. Any insight into finance would be much appreciated!

 

[rexxkai]

thanks to hatterasguy for the awesome info!!

would like to know more!!

 

[Roger]

I work for a real estate developer in Spain but the market is just terrible. Yesterday I visited an old condo to reform, had all hopes, but after doing the math it became clear that it's not a viable enterprise at the moment. My friends in the US are moving to Asia (India, Vietnam, Thailand). It looks like most developed nations are overbuilt.

On the other hand, my family owns some parcels in Brazil (where I'm originally from). It's a large, fenced residential area divided in 83 pieces, where people buy land to build their own houses. We sold most of them already but still there are around 12 plots available (300 m2, or 3229 sq ft each). According to MJ's book, real estate is only "fastlane 1.0"... but like hatterasguy said it's an interesting business if you like crafting things.

Now I am thinking about building the houses myself (as a project manager) to sell for a profit, instead of selling just the land plots. The problem in Brazil is that interest rates are insanely high (over 18% per year!), so essentially one has to buy all building materials yourself during construction time. The risk is, of course, not selling the house you just built, but then you can always rent it. FYI a 150 m2 house (1615 sq ft) in that exact spot currently sells for US$ 228,000 (about 25% net profit after *all* costs incl. taxes, resulting in ~57,000$ in this case.) I don't have the money to develop all 12 plots at once, so my plan is to start with one house, then two, then four etc.

If anyone with experience in such projects could give me some hints or pitfalls to look for, I would be very glad. Also should I consider looking for capitalist partners? Maybe opening a LLC? What do you think?

 

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[Butler]

Hatterasguy, Thank you for your original post. I just joined the forum because of it! I love what is going on here.

I hope to tackle some real estate projects in the coming years. Im about to graduate college with BS in Management and luckily I already landed a solid job locally that pays decently but my grand scheme is to ultimately be in business for myself. Your knowledge and experience are valuable, thanks for sharing your time with us!
Cheers to your endeavors.

 

[hatterasguy]

hatterasguy, I live in Aus and am very keen to start property developing eventually sub divisions and have been researching for the last couple of years. I ve been around civil so i know earthworks,storm etc and i have mates in various trades who would do work for me. My biggest question is getting finance. How do you find private lenders?? Can you get 0 loans, if the loan is only for the short term with fair returns?? Finance has been my biggest hurdle, especially when the ex got majority out of my pocket. lol. Any insight into finance would be much appreciated!

Private money is nice because its easy. I have lenders that will give me just about whatever I want on short notice with just the basic info about the deal. I typically pay them 10% which is a lot, and I like structuring them so I don't have to make payments, I pay all the accrued payments at the end, at the closing.

Right now though I'm mostly working with a bank which does construction mortgages for 5%, and are pretty good to work with. A bit more of a PITA than private money but its half the cost.

Banks are tough though right now; most won't take new business on. I only got into this bank because a relative is an established customer of theirs. I also don't deal with the little loan officers, I don't even know any of them. I only deal with the VP of commercial, president, and a few board members.

OTOH I also have a bit of money and assets now as well, I'm far from broke. Most of the time when I deal with these people I already own the land free and clear, and may have one of more houses already 50% up on my dime.

Best way to start with no money, is like I did. Find a deal and a partner who has the money, who wants the deal.

 

[hatterasguy]

More thoughts.

When I look for a deal sometimes I will just drive down streets. I know my cities zoning laws so well that I can literally "see" them at work on every parcel I drive past. When I see one that doesn't make sense, or I think is being under utilized, that's an anomaly and a potential deal.

Something that I think every real estate developer has in common is they know their trade. They have knowledge of their local and state laws on par with a real estate attorney, and people on speed dial who can answer any question that they may not know in this area. A lot of people screw perfectly good deals up because they don't put the time in to really know the law.

Subs you can hire out, although I recommend not being totally clueless in this area. Finding and putting together profitable deals is where the real money is at. All you need is your local zoning book, a pen, and a cell phone.

 

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[hatterasguy]

As the years go by the hardest thing I'm finding was getting the ball rolling. This is an extremely capital intensive business, you can never have to much money. Its also a business where to much leverage will kill you.

Right now I'm getting to the point where I have a bit of capital so I can start to get rid of lenders, and consolidate. In another 2 years I should be able to do the majority of my deals with cash. IE buy the land, build the house, and sell. 100% cash money no lenders involved.

Cash is king in this business, subs want to get paid now, good deals usually can't be financed, and interest and closing costs are a financial drain. Also having paid for properties gives you a lot of maneuver room if the market tanks again, ie you can sell them cheaper to just get your money back or rent them.

 

[wlius]

hatterasguy, its nice to read your posts. Just join the forum as I found this is the community I'm looking for, to share and gain knowledge about RE overall.

I'm currently working my commercial RE in Indonesia as here is the place where I born. Started the project on November last year, and so far I have sold 50% of the commercial buildings. This is my first project though. I was just graduated from Ohio State, and went back directly to my country to work for private equity and resigned a year later to pursuing my career as RE developer. The market here is very good. I think it is less competitive than developed country and it also offers higher return.

I bought the land by cash costing around 450k, by finding 2 partners to help me fill the money. Take a loan from banks which introduced me also by a partner. Hire contractor costing around 400k to finished up the buildings. Since the local regulators here is very corrupted, unlike developed countries, I also hire government people to handling all the building permits and pay them 50k just only to make sure my RE construction wont get interrupted. Its quite different process. So far sales number is still on the line with estimation, and may resulting in 1.4million in sales. producing me an okay profit there. One thing that I dont agree with hatterasguy is his advice using only cash. cash is a king thats true. but mixing it with debts will resulting you the optimal profit if you put ROI as your benchmark.

Now, I'm ready to move on to the second deal, already made an offer for pieces of land to be constructed again to become commerial areas repeating the process above. Strengthening the relationship with local government, BANKSS, and investor is the key here. Also RE brokerage can play a big part since they helps finding the potential deals.

 

[wlius]

just read about the same thread as this one

https://www.thefastlaneforum.com/re...8852-path-becoming-real-estate-developer.html

also a good read.

 

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[Avery]

Updates?

 

[hatterasguy]

Sorry I'm just to busy right now to do a proper update the market is screaming around here.