Land Development is the conversion of vacant land into construction ready housing, industrial or commercial building sites. The process involves improvements that have an indefinite life such as draining, excavating, filling, utilities, paving, etc.
Now that we know what Land Development is, why doesn’t every one become Land Developers? We see new commercial construction everywhere in the Vegas Valley and all those Developers getting rich. It must be easy…right? Actually, far from it.
The Land Development business is a very high risk/reward industry and should only be practiced by professionals. The average person may have the impression that every Developer In Nevada is extremely wealthy and every Commercial Construction project is a winner. From all the vacant buildings during the Great Recession we know this is not true. The process is extremely complicated. Here is a brief description of what needs to be done.
· Raw land needs to be located for a project and extensively investigated to make sure it is suitable. Often professionals like engineers and geologist need to be hired to evaluate the land. A poor investigation can result in an extremely expensive surprise.
· Financing for the project needs to be arraigned. From the start of the Development process it can be years before the first revenue dollar is collected. Initial financing is often supplied by a group of investors, then financing by banks. Raising capital in this shaky economy is not an easy task.
· Now it is time to hire and manage a team of professional consultants. Architects, contractors, geotechnical engineers, civil engineers, mechanical engineers, planners, electrical engineers, traffic engineers and many more.
· With the team of professionals in place the entitlement/design/permit/ process begins. This is a long and complicated process that needs to be managed on a daily basis. One misstep in the process can add months to the schedule. A lot of money is needed to pay the consultants, permit fees and performance bonds.
· Construction now begins and the cash outflow is enormous. Hopefully cost over runs will be kept to a minimum, otherwise the Developer has to go back to the investors/bank for additional funding. Hopefully the appraisal for the project will be where it needs to be to get financing.
· During the construction process it is time to find tenants to occupy the commercial buildings. Hopefully some “big box” tenants have been found at the beginning of the process, but rarely is all the space leased out once construction is completed. The goal is to find enough tenants to cover the service on the debt.
This is a very brief description of what needs to happen during the Land Development process. We see the projects that are successes and seldom do we hear about the ones that fail. Anyone considering developing a commercial building would be wise to partner or invest with the professionals at First Federal Realty DeSimone. Contact them at 702 990 8660 and ask for Joe DeSimone, Jr. Joe and his team have dozens of successfully completed Land Development projects in the Las Vegas Valley. Success in the Land Development business is not easy, or everyone would do it.