The development of a property must take into account the optimization of numerous qualities of the property. The most important factor is finding the best use of the property that fits with the zoning laws that dictate what is allowed on the land. Another factor is the maximum density and any overlay districts. But the resulting design from all of these factors must add up to a project that makes a profit after all of the development and sales costs.
There are several guidelines to choosing a property to develop. These are the rules by a local group of developers:
- Location, location, location: The property must be in a desirable neighborhood or retail part of town.
- Geology: No excessive slopes, sliding, or liquefaction areas.
- No riparian right of ways. No easements other than for utilities.
- Shape of the lot: The lot must be rectangular in size, not excessively long and not very square.
- Purchase price: Not to exceed 25% of the resulting sales price for PUD or condominium developments, and not to exceed 35% of the resulting sales price for signle family residence. On commercial properties, a CAP rate must be evaluated to determine its desirability.
- No high-end developments: The target sales price should be no more than 80% of the high-end properties in the area.
- The contractor should not be part of the development team: This is due to conflicting desired end-results.
Miscellaneous:
- Minimize BMR’s due to the lost potential income and the actual loss to build and sell.
- Do not combine commercial or retail with residential because the parking needs for the commercial and/or retail is far too high and cuts into the amount of residential. Often the residential is sold to recover the initial investment, and the profit is stuck in the ownership of the commercial/retail space.
- The neighboring properties often affect the final design. Beware of overlays and restrictions.
- Beware of properties that are on a busy street or near municipal facilities as they often negatively affect the resulting sales price by 10% or more.
- Never trust the budget for permit costs given by the City. This is often 40% low and does not include fees for Parks-in-lieu, traffic, and schools.
- Include ample time to go through the City process for entitlement.
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Procedures for applications to the Department of Real Estate - all developments with four or more condominiums.
- Hire a Real Estate Attorney to prepare:
- Articles of Incorporation for HOA
- CC&R’s
- By Laws
- EIN Number
- Ballot Elections
- SI 100 Form
- SI CID Form
- Action by Sole Proprietor
- Hire a DRE Application Consultant to expedite the filing.
- Hire a management firm to prepare a formal HOA Budget.
- Submit Notice of Intention to the DRE.
- Prepare Application for Minimum Filing Package:
- Prepare Civil Drawings, Plot Plans
- Prepare full set of drawings and submit for reference
- Tentative Map – prepared by Civil Engineer
- Phasing Plan, list of units
- RE Form 624A: Common Facilities for the HOA
- RE Form 623: HOA Budget
- Financial Arrangement to assure completion of common facilities
- Receive Conditional Approval from City and/or County
- Preliminary Title Report
- Water Company approval
- Flood Report
- Schools Report
- Sample Grant Deed
- Escrow Instructions
- Common Area Conveyance
- Subordination
- Submit Application to the DRE
- Wait for an acknowledgment for a Substantially Complete Package and Application.
- The DRE will begin the Final Public Report Process.
- Receive Conditional Report.
- Receive Qualitative Deficiency Notices for corrections and additions to the package.
- Receive Budget Deficiency Notices for errors to the budget
- Resubmit any Qualitative Defficiencies.
- Obtain Bonds for:
- Common Area Construction
- Public Works Construction
- Street Improvements
- Substantial Completion
- Record Final Map
- Receive Title Report
- Receive Title Insurance
- Obtain new APN numbers
- Receive Original of the Recorded Public Report.
- Provide copies to buyers and take receipts.
- Return the original and two copies to the DRE
- Developer hold copies of receipts for buyers for three years.
- Provide Warranty for SB 800 requirements
- Provide a one year construction warranty.
- Provide a ten year Builders Wrap insurance policy.
- Provide Builder’s Wrap Administrator
- Provide Builder’s Wrap Quality Insurance Inspector
- Hire a management company for the HOA:
- Hire landscaper
- Hire Janitorial
- Hire Vendors for repairs and maintenance
- Provide insurance for HOA and Board Members
- Action of Sole Proprietor to adopt election rules
- Hold HOA meetings
- Elect HOA Board Members
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