Financing Land Development

1
Financing Land Development

• Jim Burton, Ph.D.
• Marketing Real Estate
• College of Business

2
Overview

• The Development Process
• Acquiring the Site
• Market Feasibility Analysis
• Development Costs
• Development Financing
• Construction
• Marketing

3
The Development Process

• Development Idea
• Preliminary Market Analysis
• Preliminary Plans Specs
• Preliminary Costs
• Development Loan
• Final Market, Plans Costs
• Construction
• Marketing Sales

4
Acquiring the Site

• Finding the site
• Buying an option
• Contract subject to terms
• Lease w/option to purchase
• Getting the zoning
• Check utilities access

5
Market Feasibility Analysis

• Demand Factors - population, employment, etc.
• Supply Factors - competition
• Public Facilities
• Absorption estimate

6
Development Costs

• Preliminary Cost Estimate
• Plans Specs
• General Contractors
• Labor Materials
• Bonds Affidavits
• Taxes Licenses
• Holdbacks

7
Development Financing

• Loan Submission appraisal, feasibility, resume,
  plans
• 50 - 60 of retail sales prices
• High rate short term
• Construction Draws
• Payback schedule

8
Construction

• General Contractors
• Sub Contractors
• Construction Materials
• Fees Permits
• PERT Chart
• Inspections
• Completion

9
Marketing

• Advertising Promotion
• Real Estate Brokers
• Employee Sales Persons
• Monthly Sales Goals
• Compensation
• Sales vs. Leasing

10
After-Tax Cash Flow

• Forecast Income
• Forecast Sales Costs Development Expenses
• Deduct Loan Payoffs
• Before-tax Cash Flow
• Estimate Income Taxes
• After-tax Cash Flow