Tips For First Time Property Developers(Last Updated On: August 22, 2018)
Most of our new clients at Fontan Architecture who are developing property are first time property developers. I highly recommend you do your homework and surround yourself with a competent team that will help you throughout the process. Here are a few things you should consider when developing a property, especially if it is your first time.
Below I will outline 5 steps for developing and then 5 general tips that may help you along the process, as a first time property developer.
First Time Property Developers
5 Steps For First Time Property Developers
- Find A Property
- Zoning Analysis
- Cost Estimating
5 Tips For First Time Property Developers
- Pay Cheap Pay Twice
- Replace Your Failing Team
- Patience (But Not Too Much)
- Get a Second Opinion
5 Steps For First Time Property Developers You Must Do
Find A Property You Wish To Develop
The first step to any property development is to find a property. Most first time developers that contact me already own a property but sometimes they are scouting properties. Comparing properties for purchase can be a complicated purpose you will want to see the rest of the tips in this article and apply them before you purchase land.
An architectural Zoning Analysis is when you hire an architect to analyze and provide a report on the property zoning regulations. a zoning report can come in various forms. It can be a written document and it can also have diagrams, sketches, drawings, or 3D building massing. See the 3D building massing diagram we did below on a zoning analysis in Manhattan for a medium sized mixed use building for one of our clients. Thsi particular analysis was done to assist the client in deciding whether or not to purchase the property.
Building Use & Space Programming
Program or Programming is an expression architects use to refer to the use of a building. First time developers need to figure out if they want to make a residential building, a commercial building, a mixed use building. The property zoning will dictate the use but in many instances you will have an option. For example in NYC most cases you are allowed to build residential buildings in commercial zoning districts.
Cost Estimating and Project Budget
Cost estimating for a building development is complicated. Architects often like to discuss buildings on a cost per square foot. For example if a building is $300 per square foot to build and it is 10,000 square feet then the building construction budget is $3,000,000. Cost per square foot is a general broad system we like to use. You can of course hire cost estimators or talk to construction contractors with your architect to come up with a price.
Cost estimating is most difficult for first time developers because of two reasons.
- First time property developers are always shocked at how much a building costs. I mean wow they get so surprised by the cost of construction and even by the cost of architectural services.
- The second reason cost estimating is difficult for first time developers is that they have no frame of reference. Most developers will use costs from previous developments to gauge the cost of future developments. This will be impossible your first time developing.
Comps is a term for comparing properties. you need to see other properties in the neighborhood and find out that they are selling for or renting for. You do not want to be too below or too above market. When you have your comps you will be able to approximate what the potential development will bring in. When you balance that against your budget you can see what the possibility for profit is.
5 Tips For First Time Property Developers
Property Development Research
Considering you are reading a blog by a New York Architect on the subject of property development I guess you already started your research process. I highly recommend you continue it. Research can take many forms I think you should start with online research and do a lot of reading. Here are a few things you might want to do as part of your research.
Visit Buildings: Find new buildings in the area that may be similar in use and size to what you want to do. Go check them out and see what you like and don’t like. If you are planning a residential development go to an open house for a new building in the neighborhood. If you are planning a commercial development go see some commercial buildings in the area.
Pay Cheap Pay Twice
One day I was sitting at the Department Of Buildings in the Bronx for a 20 unit residential project I was consulting on. A man came up to the counter and asked how he can find out what he can build on his property. I overheard the gentlemen from the DOB tell him to hire an architect to do a zoning analysis and then he said “Pay Cheap Pay Twice make sure to get someone good who knows what they are doing.” Then he said it again “Pay Cheap Pay Twice.”
One issue with first time property developers is that they have no frame of reference for what things should cost. So you may hire someone with dirt cheap prices but maybe their prices are low for a reason. this should go for everything. The project I was consulting on was originally done by another architect and took almost 10 years to build 20 apartments. The client brought me to get things into shape because his original team was failing him and he was nearing the point of going out of business. We got the job finished and occupied with tenants and he is now happily collecting rent on his apartments.
One more anecdote on the issue of hiring the cheapest people. I had a client who hired the cheapest contractor he could find for a job. The entire job was a disaster and took very long to finish. the contractor would flat out lie to cover up problems he was causing. the last straw was when his plumbers license expired in the middle of the job and we could not get a plumbing sign off by the DOB plumbing inspector.
Replace Your Failing Team
Replacing an architect, engineer, or contractor is a big deal and should not be taken lightly. I usually advise people to try to get their current team to work together and resolve the problems on the job. When that is impossible you need to take the steps to move forward and sometimes that means replacing someone on the team or even the entire team.
Have a Little Patience When Developing Property
Sometimes the DOB is overloaded and it takes a long time to get approvals. You need to be a little patient but don’t be too patient. Don’t let your team take advantage of you and at the same time don’t drive them crazy calling them 5 times a day. Ask for weekly updates on progress and its okay to push a little if things are going slow. Be reasonable with everyone and also consider their perspective. And don’t ever go into the Department Of Buildings yelling this will accomplish nothing.
Get A Second Opinion On Your Development
There is nothing wrong with talking to more then one contractor, architect, or engineer. you can also try to contact other developers and ask for a little help and advice. If you are a first time property developer don’t be too proud to ask for help. If your architect or contractor talk about things you don’t understand ask them to explain. If you want free advice in NYC you can go to the DOB small business and homeowners night. There you can meet with one of their architects to discuss your project.
Thank you for reading our Tips for First Time Property Developers
Developing a building is a big deal especially for a first time property developer. I wish you the best of luck and I hope this was helpful. Please feel free to post questions and comments below or contact us directly if you have a project you would like to discuss. If you are looking for a residential or commercial building architect we are happy to see if we can help you with your project.
Author Jorge Fontan AIA
This post was written by Jorge Fontan, a Registered Architect and owner of Fontan Architecture.