Be A Successful Green Land Developer

By R. Dodge Woodson

Help the Environment While Increasing Sales

Bestselling author R. Dodge Woodson brings the growing number of options available for developing land without doing harm to natural areas. In this comprehensive guide, he explains how such building techniques will increase sales, improve the bottom line, and help sustain the environment.

Be a Successful Green Land Developer addresses all the practical issues that arise when embarking upon green building projects. It explains every aspect of the subject, from getting started in the green building business to mastering green terminology to making money with green methods. Learn how to understand zoning requirements, covenants, and restrictions…write winning proposals…and expand business. The book also examines 20 common mistakes and how to avoid them.

Green construction is here to stay. Use Be a Successful Green Land Developer as a roadmap to profits and growth in this exciting new realm of business.

This practical, plain-English guide to green land development includes:

• Valuable tips on preparing winning bids
• Step-by-step advice on expanding a green building business
• Important insight into the costs associated with earth-friendly land development
• Sample contracts, zoning forms, and development/broker forms

Develop a lucrative green development enterprise with valuable lessons on…

Using Green to Make Big Bucks • Building a Strong Development Team • Working with Real Estate Brokers • Setting Up Your Lenders and Investors • Finding Suitable Development Property • What Makes a Project Viable? • Looking for Land in All the Right Places • Initial Investigations • Drainage Factors • Soil Considerations • Calculating Land Losses for Roads and Green Space • Water Requirements • And More

• Language: English
• Publisher: McGraw-Hill Education
• Release date: Dec 1, 2008
• ISBN: 9780071592604

R. Dodge Woodson

Author R. Dodge Woodson is a long-time gardener and master plumber. He is the author of a number of how-to books, including Storey's Watering Systems for Lawn & Garden. He lives in Maine.

Book preview

Introduction

Sustainable building practices are the wave of the future. Going green is good for the environment and can be very good for your bank account. The demand for eco-friendly building practices is high. People are willing to pay more to waste less. This is a key to future success for land developers.

Whether you are a carpenter or a builder who wants to venture into becoming a green land developer, you should give serious consideration to sustainable development and construction practices.

Going green is not as simple as using a few green tactics in your development of house lots and commercial spaces. You should integrate various sustainable options to provide a full green package. This is the best way to earn your reputation as a green developer.

Before you take out new ads that label you as a green developer, you need to understand what responsibilities you are taking on. To be a real green developer, you are going to need to educate yourself from start to finish, and this book is the starting point.

With over 30 years of experience as a developer, designated real estate broker, builder, remodeler, and master plumber, I know what I’m talking about. This is your chance to gain invaluable experience for a fraction of the cost of what a one-hour consultation would cost. If you are looking for a brighter future in the green development business, this book is the book that you need.

Take a look at the table of contents. Flip through the pages and notice the tip boxes. I’ve done everything possible to make this book a pleasant trip rather than a boring learning experience. I trust that you will find this an effective view of what it takes to become a successful green land developer without the suffering often associated with learning. This is your fast track to getting in on the green boom.

Be a Successful Green Land Developer

CHAPTER ONE

Why Should I Consider Green Land Development?

Why would anyone consider green land developing? Money can be a major motivator, and there can be a lot of money in developing raw land. The profit potential of land development is incredible. When you add the twist of developing with sustainability as a cornerstone, profit potential grows. There is substantial risk attached to some development deals, but there is usually risk when there is the potential of rich rewards. Homebuilders need land to build on. Most builders buy their building lots from developers, but they can increase their profits considerably by developing their own building lots. How much extra money can builders make when they develop their own lots? It depends on many factors, but some builders have cut their land cost in half. I know that this is true, because I am one of those builders.

Green builders and green developers need each other. The total concept of environmentally friendly developing needs both builders and developers to be on the same track. Green builders are not going to do nearly as well building in standard developments as they are when they work with green developers. In a similar vein, green developers will be gambling on the sustainability factor when they go green. If the builders who buy the developed lots are not willing to pay for the added benefit of sustainable development, the developer is not going to make as much money.

If you are already a green builder, developing your own projects is an excellent way to expand your business. Developers work in many ways. Some of them concentrate on large commercial deals, such as shopping centers. Creating a large subdivision of building lots for homes can prove very lucrative. Small developers can do well by subdividing small parcels of land into just a couple of building lots. Whether you are cutting a single parcel into two building lots or developing hundreds of acres into a sprawling subdivision, there is plenty of money to be made with land development.

PRO POINTER

Almost anyone can learn to be a land developer. However, developing the skills to create profitable land deals may take a lot of time and effort. The money from developing does not usually come easily. Many developers fail before they see their first projects completed. Getting financing for land acquisition and development can be extremely difficult for anyone who has not established a successful track record. There are many obstacles between the purchase of raw land and a prosperous completion to a project.

You don’t have to be an expert in any particular field to make money as a land developer. Anyone with reasonable intelligence can carve out a place in the world as a developer. Money and good credit are advantages to an aspiring developer, but with creative partnering a person can rely on others for cash and credit. A feel for real estate is important, and the willingness to work hard, learn daily, and make adjustments as you go along all help a person to become a successful developer.

PRO POINTER

How Much Money?

How much money does it take to become a land developer? The amount of money needed varies from deal to deal and developer to developer. It’s possible for developers to begin their work with very small amounts of money. If a person has good credit, the need for cash on hand is greatly reduced. Some developers are able to create projects with virtually none of their own cash. Some money is usually needed, but the amount can vary considerably.

PRO POINTER

As a builder and developer, I have done deals of all sorts. I’ve taken 200 acres of land and turned it into 10 20-acre lots. Working with a partner, I participated in the development of a shopping center, a large housing tract, and similar deals. On a smaller scale, I have purchased small pieces of acreage and cut them in half to create two building lots. My past experience includes working with other developers to control dozens of lots in a particular subdivision. Most of my experience has been with residential developments.

In addition to being a builder, I also owned a real-estate brokerage. During my work as a broker I’ve helped investors and developers structure numerous land deals. Some projects that look great on the surface turn out to have severe development problems. It’s also common for an unused piece of property to have a higher and better use. This is what land developing is all about–finding a higher and better use.

During my career I’ve seen deals done with as little as $100 from a developer’s personal bank account. Developers should plan on needing much more than that, but the out-of-pocket expense can be kept to a minimum. Developers who don’t have cash or credit can turn to partners to make a project come together. Almost anyone with determination can find a way to develop real estate.

PRO POINTER

Large development plans can require thousands upon thousands of dollars before any hope of creating income can be seen. It’s not unusual for tens of thousands of dollars to be spent before the first shovel is filled with dirt to break ground. Developers working on a plan for a shopping center might spend $100,000 just to get approval for a project. On the other hand, a builder who is splitting one building lot into two lots might not need any cash before financing can be arranged.

Builders with good track records can often include the cost of land acquisition in their construction loans. This is the way I’ve normally done business over the years. If you create a good relationship with a lender, you may be able to start developing land with the only money out of your pocket being an earnest-money contract deposit to buy the land.

How Do I Find Partners?

How do I find partners if I don’t have enough money to work on my own? Potential partners for land developers are everywhere. Some of the partners are investors. If you have a good plan, an investor may put up the money and credit to get the job done. Of course, there will be a need for the investors to see profits. The investors may want a percentage of all profits made, or they may want to earn interest on the money that they are putting up. But money investors are not the only way to get what you need.

There are many types of professionals involved in land-development deals. Surveyors, engineers, architects, and others may be needed in the planning stages of a development. These professionals are sometimes willing to perform their services without immediate payment. The pros might be willing to gamble their time and skills to get a piece of the action. Even banks may be willing to participate as partners with land developers.

Not all homebuilders are developers, but any builder who builds in volume may make a great partner for a land developer. Builders need land to build on. If the builders can turn extra profits by working with a developer, they may be willing to lend their reputation, cash, and credit to create a new development.

PRO POINTER

Finding partners for land deals is not difficult. However, developers must be careful when choosing partners. And it makes the most sense to limit the partnership to one particular development. Partnerships often end on a bad note. It’s usually best when the partnership is limited to a single deal so that later deals can be done together but are not required to be.

More Control

Money is not the only reason for home-builders to expand into land development. Builders can gain much more control over their businesses when they develop their own building lots. A builder who is not a developer has to buy building lots where they can be found and for whatever price it takes to get them. But builders who create their own developments have unlimited access to the lots that they are developing.

PRO POINTER

It’s not uncommon for a developer to option or sell large blocks of building lots to selected builders. A subdivision of a hundred lots might be limited to just four builders. This kind of deal is common. Selling to just a handful of builders is convenient for developers. It is also cost-effective in terms of marketing. The downside for builders who are not invited to buy into a development is essentially being locked out of the subdivision.

Some developers limit the number of builders allowed to build in a subdivision to maintain quality construction. It could be that each builder will offer four to six model homes that can be built in the subdivision. If there are 100 lots and four builders who will build four to six types of houses, this works out to 16 to 24 house styles. This type of practice is very controlling, but it goes on all the time. And it can shut out small builders who can’t afford to build in high volume.

Successful developers generally have a following of builders. It can be very difficult for a new builder to break into the loop. But if the new builder can develop building lots personally, the heat is off. Builders who do their own developing have much more control over where and what they will build, and they normally make a handsome profit on the land.

How Much Risk?

How much risk is involved in developing land? There can be substantial risk, but it can be managed. Some types of developments create more risk than others. Assuming that all zoning and local code requirements are in order, doing a subdivision of a single lot shouldn’t be very risky. Planning to develop a shopping mall is a very different matter. Large commercial ventures can be extremely risky, as can large residential developments.

Many investors feel that risk is directly in proportion to potential reward. Sometimes this is true, but not always. A lot of money can be made without exposing yourself to excessive risk. Risk management is crucial to enduring success as a developer. A lot of people assume that small projects carry small risk. This is not always the case. Risk is risk; it is not always tied to the size of a project or the potential profit of a deal.

There is risk involved with developing land. Of course, there is risk in all types of business. Builders who build on speculation take risks all the time. There can be a lot more risk involved with opening a restaurant than there is with developing land. Basically, the skill, experience, and knowledge of the developer curves the risk factors. Inexperienced people who jump in headfirst and don’t take the time to learn what to do beforehand are at much higher risk than seasoned developers. Fortunately, learning to reduce the risk of land developing is not all that difficult. With the right research, you can turn the odds in your favor quickly.

How Can I Compete?

How can I compete with the big guns of the business? Don’t established developers have their pick of all the prime property? Developers who have been in the business have certain advantages, but they don’t hold all the cards, especially when home-builders are turning into developers. Many business owners become lazy once they have enough business to satisfy themselves. This can leave a door wide open for aggressive new developers. As for prime property, new developers who dig deeply can find ideal properties before they are offered for public sale. Yes, the big guns will be looking for the same treasure, but it is a race against time, and anyone can win it.

You don’t have to possess a long line of credentials to get into land development. If you choose to break into big-time development, you may well be biting off more than you can chew. But there are plenty of opportunities for small investors. Little land deals can turn big bucks, so they should not be overlooked. In fact, this is one reason why new developers have a fair shake. Once developers grow to large proportions, they probably will not pay much attention to a piece of property that can be cut into four building lots. It’s not that there isn’t money to be made or that the money couldn’t be very good. Usually, it’s just because the big developers are too busy on major projects to ferret out small deals.

Developers who are not builders have to make all their money from the sale of building lots. There is plenty of money to be made in this way, but builders hold an advantage. Builders can profit from both the markup on building lots developed and on any homes sold. This, in essence, gives builders an added edge of security. If the profits from the land are not as strong as projected, the profit from the houses can still make a project fly. Having the dual earning ability definitely gives builders an advantage over standard land developers.

Red Tape

Isn’t there a lot of red tape involved with land development? There can be. Many state, federal, and local agencies may have a say in whether or not a piece of land can be developed for a specific purpose. Cutting through the red tape can take years for some projects, but other projects can zoom through the approval process without much fuss. The work required to gain approval for development is worthwhile for projects with strong potential, but it can be a bank-breaker on marginal deals. Learning to estimate the amount of red tape to be cut is just part of becoming a successful developer.

PRO POINTER

What type of trouble can a developer run into from various agencies? Depending upon where land is located and what the intention for its development is, the obstacles in front of a developer vary. You might have trouble getting approval from a zoning board, but this is a risk that should be set aside as a contingency in the purchase contract for the property. If zoning regulations will not allow the intended use, you should have a clause in your contract that allows you to void the purchase agreement. Be warned: This is not standard language in most boilerplate contracts. You, your broker, or your attorney must make provisions for it.

Environmental agencies can wreak havoc on development plans. Usually, intervention from these agencies is well warranted. However, stopping the development of a large tract of land because there is a frog pond in the back corner may be excessive. Normally, developers can find a way to work with environmental issues so that everyone wins, but it can require leaving a chunk of real estate that was originally slated for profitable development untouched.

Red tape reaches into deed restrictions and covenants, too. A previous developer may have created rules that are not easily broken. Politics can be a factor in developments, as can noise. A developer who is required to install a noise barrier that was not planned for can see profits shrink quickly. The cost of connection to municipal utilities can cut heavily into development profits. Plenty of research is needed to avoid costly problems, but this should not be a deterrent. If a project shows viable potential, the time spent will be well rewarded.

The Transition from Builder to Developer

The transition from homebuilder to land developer is a natural one. Builders who build in volume can benefit greatly from doing their own development work. You don’t have to be building 60 homes a year, like I used to, in order to justify land development. Being a developer is enough in itself, but when you factor in the builder’s profit, the deal gets sweeter. Most experienced builders have enough industry knowledge to step into the role of a developer without much trouble.

If you are a builder, getting into land development shouldn’t be too difficult, and it could prove to be extremely profitable. Are you working a full-time job and wishing you had a business of your own? Would you like to work part-time and make a full-time income? People who hold down day jobs can be developers in their spare time. That’s right–you don’t have to be available full-time to make major money as a developer. Nights and weekends can provide plenty of time for you to act as a land developer.

CHAPTER TWO

Using Green Space to Make Big Bucks

Using green space to make big bucks is good for the environment and your bank account. Sustainable developments are growing in demand. For developers who want to stay in step with changing times, going green makes a lot of sense. What is the ruckus all about? People are tired of being wasteful. While they want comfortable lives, they want them to be designed and built in a way that has less impact on the environment. And, they are willing to pay for what they want.

I have been involved in real estate and construction for over 30 years. In my younger years it was fashionable to use every available inch of land for salable structures. The mentality was pave it all.. Fortunately, this has changed. I have seen this change evolving for years, and now we are in a major push towards eco-friendly developments.

Old-school developers may have trouble believing that they can make more money by making fewer building lots. On the surface, the concept is not comprehensible. However, you really can make as much or more by using less land. This gives you the best of both worlds. You get paid handsomely for your efforts, and you contribute to the future of the environment for generations to come at the same time.

How is it possible to make more by doing less? Simply put, people are willing to pay a premium price for quality living conditions. This is not so difficult to understand. Our world has changed greatly over the last few decades. Think about it. If you are old enough, you must remember some key changes that are undeniable. One trend is green developments. To make a point of this, let’s step back in history for a moment to share some memories of the way the situation used to be and how it has changed:

• Kids could play tag and dodgeball as a part of school activities.

• Smoking was considered a social event.

• Unleaded gas did not exist.

• Terrorism wasn’t talked about daily.

• Water quality in rivers was often ignored.

• Good gas mileage was 18 miles per gallon.

• Electric cars were found only on toy racetracks.

• When you thought of green, you thought of a Muppet frog.

• A calculator was thought of as a computer gadget, and slide rules ruled the engineering world.

Yes, things have changed, and they continue to change. If you don’t change with them, you could become as forgotten as leaded gasoline. It is time to go green.

Why Will People Pay More?

Why will people pay more to go green? I think it is a personal decision. Lower impact on the environment is valuable to many people. For this group, paying more for a comfortable community is well worth the price. Different people have different reasons, but they have one thing in common. They are willing to pay more for sustainable living conditions.

Which Types of Features?

Which types of features are consumers looking for in green developments? Many components can come into play when designing a sustainable development. Let’s look