We mostly buy existing MultiFamily apartments here at Zovest. We are exploring avenues to do new development of MultiFamily in markets where the cap-rates shrunk so much that prices of 1960's to 1980's properties have skyrocketed, that it makes sense to do new construction instead of renovating old ones.
We are going through a process of new development in couple of markets and this is what we learn till now. 30,000 feet overview of phases.
1) Identifying the Raw Land which can be non-residential/ non-commercial
2) Entitling/ Rezoning the land to do residential/ commercial medium to high density
3) Going horizontal by grading the land, laying roads and adding utilities like electricity
4) Going vertical by constructing the building
Phase 1) Identifying the Raw Land which can be non-residential/ non-commercial
The first step to pursue new development/ construction is to select the markets/ sub-markets/ neighborhoods. Please refer to our earlier blogs to identify them. Other than that, you also need to find out the absorption rate which tells you how many new units are getting absorbed (rented) into the market with existing inventory. If absorption rate is low it will be difficult for the new units you are building to be rented. Typically if population in that market is growing more than double the national average, then it make sense to build in that market as a long term strategy.
Once you identify that location, we have to find any raw land which might be zoned non-residential or non-commercial or residential low density housing (low number of dwelling units per acre). For example, we are looking a land which is zoned a single family home for each 10,000 sq ft of land. This is really low density.
Phase 2) Entitling/ Rezoning the land to do residential/ commercial medium to high density
Once you find that raw land from #1 above, you need to go to city/ planning commission to apply for rezoning or entitling the land to make it medium to higher density. First, you need to identify if the land is suitable for development, make sure any environmental issues or grading issues that prevents new development. Second, you need to setup a neighborhood meeting to take their concerns of a new development. Third, submit an application with city to request for rezoning to medium to higher density or ask for commercial from residential or other ways of rezoning based on requirement.
Phase 3) Going horizontal by grading the land, laying roads and adding utilities
Once the land is rezoned then we have to grade the land to make sure the land is flat for development by removing all high and low spots, lay the roads based on site plan, add utility connections like electricity, water and sewer lines, make the land pad ready so we can do actual construction of buildings.
Phase 4) Going vertical by constructing the building
Since each building pads are ready, we can start constructing each building or construct multiple buildings at a time. Usually there will be phased approach so homes/ buildings can be constructed to sell or rent in a timely manner. This will help in not waiting till end of completion of the project to start selling/ renting.
Zovest will be doing new developments in future. Please reach to me at firstname.lastname@example.org to know more about the phases of development.