How to Develop Your Property

The maximum value of a property is obtained when it’s placed into service at its "highest and best" use. How do you go about developing it? If a buyer were to make an offer, what business terms should you expect to negotiate?
Here’s a summary of the process and the typical timeframe (in months), followed by more explanation:

Month:   1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
1. Investigation (inspections)    
2. Site development permit      
3. Construction drawings      
4. Building Permit    
5. Construction                
6. Move-in or Lease-up            

1. Investigation

First, the potential developer must determine whether the property is suitable for the proposed project. During this period, referred to variously as the "investigation," "feasability," or "due diligence" period, the developer might want to make exact measurements of the land area, test the soil for possible contamination, and talk to neighbors about their feelings towards such a project, etc. This period usually lasts 30-90 days with 60 days being typical.

2. Site development permit

After the site is determined to be appropriate, permits must be applied for. The developer will discuss the project with the city planning staff and obtain a "preliminary approval," indicating that the city will consider issuing a building permit for the proposed project. If the city does not approve, the developer must re-work the project until it’s acceptable. Obtaining this approval typically requires 45-90 days.

Often, as a condition of approving the project, the city will require the developer to "dedicate" some of the land to the city for road widening or require the developer to improve the neighborhood infrastructure, such as installing new traffic signals, building a park, etc. These dedications can be expensive but that’s the system. Finally, if the location is not zoned for the proposed project (i.e. the zoning is for single family residential and you want to build apartments), City Council approval for a zoning change must be secured — that takes even more time.

3. Construction drawings

Next, detailed plans are drawn showing how the finished project will look, how many units will be constructed, the number of parking spaces, the landscaping, new trees to be planted, and improvements to the neighborhood, such as new sidewalks and gutters.

4. Building Permit

The site plans are presented to the City Council for approval. As part of the approval process, the developer might be required to hold neighborhood meetings at which local residents can voice their questions and concerns about the project.

After receiving the input of the planning commission and the community, the City Council will decide whether or not to issue a building permit. Depending on the amount of neighborhood feedback and the City’s own priorities regarding the project, the may approve the permit or may send it back to the developer for modifications to the plan. As you might imagine, this process can consume many months.

5. Construction

Once the permit to build is issued, the ’dozers hit the ground and the workers in hard hats appear to begin construction. With good weather, good workers, and a good supply of materials, construction can be completed within a year or so. Rain, labor shortages, strikes, failed machinery, incorrect plans, and delays in material delivery can be expensive.

6. Move-in or Lease-up

Upon completion of construction, the city will issue an occupancy permit and the project is ready for new residents. During the "lease-up" phase, the property manager will be quite busy until all the units are sold or rented. The time needed to complete this final step is typically 3-6 months.

Summary: In this general discussion we’ve outlined the steps necessary to develop a project. As you can see, the requirements and timeframes vary greatly by project and location — taking a project from inception to occupancy is a multi-faceted undertaking. If you have property that is developable, call us to discuss its value and how to maximize its potential.

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