MULTI-FAMILY DEVELOPMENT This step-by-step guide

MULTI-FAMILY DEVELOPMENT

This step-by-step guide will ensure that decision making strategies stay on track.

1. ECONOMIC FEASIBILITY It is critical to determine your desired return on the property before getting started. Having a set profit in mind before developing the raw land is essential to the success of an investor because it will not only lessen the uncertainty of the market, but it will also provide a model of the costs versus profit aspect to your investment.

2. ACQUISITION Once you understand the costs you’re likely to encounter, including what you should receive in return, you can better determine the offer price. It’s important for investors at this stage to have contractors submit actual bids for the project.

3. ZONING AND ENTITLEMENT The design of the land is the foremost concern in the zoning process. This pertains to what type of property should be constructed on the parcel, including looking into local zoning codes. Zoning codes will essentially determine what types of properties, whether single-family, multifamily, condominium or commercial, can be built on the lot.

4. FINANCING The way in which you intend to use the property will dictate the type of financing you obtain. The one aspect investors should care the most about is the “loan-to-cost” ratio (LTC). The LTC is the amount of money the lender will provide for the project, which will generally depend on the type of construction and use of the property.

5. CONSTRUCTION In most cases, construction will consist first of horizontal development, like grading for roads, curbs and utilities, and then gradually erecting the property from the foundation up. When financing construction, contractors will be paid in increments of duties performed, including phases of the project. In many cases, construction lenders will hold back approximately 10 percent of the construction loan until the project is completed.

6. MARKETING In this phase, research into the neighborhood, the market price, and demand for rentals will pay off. Investors should also have a marketing plan in place to attract attention to the property.

Please contact RM Properties for assistance today (323) 209-8510 or visit www.richardmrealestate.com

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