What To Do Before You Start A Development Project

Before you start a development project, meaning purchase the land or begin to spend real money, you need to have a clear picture of what you can build and how it can generate meaningful risk adjusted returns.

How do you determine that? You need to have:

o A conceptual plan laid out based on the in-place zoning and potential buildable area given inputs from the zoning ordinance, local municipality and community stakeholders.

o Solid market data, so you understand rents, vacancy, tenant improvement allowances, etc.

o The right financial model. This can be a simple back-of-the-envelope model, but it needs to have the right inputs and outputs to determine how feasible the project is.

o An understanding of actual construction costs or the cost of repairs for value add projects. You should also have some basic understanding of how long it will take to build.

o A solid grip on the local economy and capital markets. Meaning, you need to understand how investors and banks are underwriting deals to ensure your numbers and expectations line up with theirs.

Once you have a property, a plan, and financing, you can determine feasibility, make a go/no-go call, line up investors and assemble a deal team to execute your vision.