Im interested in learning the processes behind residential development as a way to invest on the side with a few of my colleagues. The plan would be to find some infill lots in up and coming areas of the city. Very interested to hear if anyone has any experience, advice or resources that would point me in the right direction into learning the processes associated with this business.
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Margins on for-sale residential product are thin even for the well-oiled machines that are national homebuilders.
Unless you’re adding value through entitlement, there’s very little room for error and the profit is probably not worth the time without significant volume and the efficiencies that come with it
If you're going to go this route, why not try fix-and-flip first?
Also - I'm not sure Spec Residential Development has ever been considered "a way to invest on the side" with colleagues. Unless a portion of those colleagues are going to be working full time on it or you're hiring a GC to manage the entire process. Which, at that point, will probably eat away at any and all of your profits.
What part of the country? I am in the Bay Area and I see these small developers building high end custom homes in all the various higher end towns in the East Bay. $400-500k parcels with 3,000 sf custom homes selling for $2-3m. No idea what kind of money they are making.
In a city in the southeast. Right now I'm just planning on driving some of these up and coming areas of the city and jotting down land and vacant houses that may have some upside and then tracking down the owner. There are two young guys currently doing this in my market who have built around 20 houses. They are selling these houses for around 300k to 500k. From what I can tell it seems that they are buying land off of homeowners who are sitting on large enough lots or they are demolishing houses and re platting the property to allow for greater density. I sent a cold email to one of the guys hoping to meet up but I doubt he's going to respond. Either way I think it's a good way to spend my off time trying to learn this business.
Take a City zoning map with you so you can see what the zoning is depending on the street you are on. If you are on a street with a zoning for 5,000 sf min lot size and there are existing old homes on 10,000-12,000 sf lots for example, bingo. Those double lots are good opportunities.
Great idea pere797 . I'm able to find my city's zoning map, but unable to find what the min lot size is. Would you mind sharing where to find this?
Its buried somewhere on the City website usually. Varies City to City in terms of how they organize themselves, what they call it etc. May have a page title something like "Zoning ,setbacks, regulations". There will be a list of zoning types, from residential, industrial, retail etc. For residential, it will then list all the various residential zones something like R1 through R10 for example and all zoning regulations for each type. Here is an example for the City of Oakland. If you cannot locate, give planning a quick call. http://www2.oaklandnet.com/oakca1/groups/ceda/documents/report/oak06362…
edit - Keep in mind too - if you want to do a lot split that does not conform to the zoning, you are going to have to go through a General Plan amendment or "planned development unit" that lets you write your own zoning rules but is usually a long public process
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