Land Acquisition and Development Finance Part I
Land Development is both an art and a science. It is an art that builds on your creativity, instincts and vision to transform an idea from concept into reality. As a science, it systematically progresses through a series of activities to accomplish a successful outcome – a new development. In this article, presented in six parts, we will discuss the Land acquisition and development finance process:
Finding the land and the preliminary investigation and financial analysis
Tying up the land and formal due diligence
Financing structures using OPM (Other People’s Money)
Organization business structures and selecting a lender
The process builds from market research and analysis that reveals buyers’ needs and market opportunity. Developers find the land that supports the market opportunity and investigates its potential for development and improvements. Land that offers a match is temporarily tied up until formal due diligence can be completed. The development team creates one or more site plans that illustrate the actual use and layout of the property. Once the presiding governmental entity approves the proposed development, developers initiate contracts and actual site improvement begins. Throughout the process, developers obtain land acquisition, development and construction financing. Each step plays a vital role in the success of a development. A developer may actually start anywhere in the process. Land development doesn’t necessarily work in a linear fashion. For example, he or she may already own raw land and desire to develop it. In any case, successful development means returning to preceding steps before completing the project to ensure it targets viable market opportunity and involves feasible improvements.
Many builders see land development as a logical step in their career and business growth. No doubt, experience as a homebuilder is a relevant preparation for the endeavor. But, before you take that step, you need a complete awareness of the market in which you plan to do business. Before you purchase and develop the land and the market, you must know that particular market. Market analysis activities provide an enormous amount of
information that is essential becomes a foundation for your
to accomplishing that task. The resulting information land acquisition and development financial decisions.
Purpose of Market Analysis.
Before you purchase and develop land in a market, you must know that particular market. Market analysis activities provide information that is essential to accomplishing that task. The resulting information becomes a foundation for your land acquisition and