All of us have heard the old adage, "history repeats itself," and in many cases it could. I went through industry recessions for the early 1980's and 1990's, and we all find ourselves in a recession again. In the past recessions as soon as the economy was still very sluggish and recovery was and not on the horizon, many developers lost their projects to banks together with other lenders. Because these banks had not been in advancement business, they needed to sell many foreclosed flats. Individuals and groups who had the financing and foresight during those previous recessions, were able to experience times of great opportunity and profits when real estate market market emerged from the recessionary instances. Does this scenario sound familiar to other companies?
During original housing recessions, one could buy finished lots for one price well below the replacement value of those lots (replacement value is thought as the funds necessary to bring a different lot to the same involving completion). In a large amount cases lots and partially completed homes could be acquired for twenty-five to fifty percent or less of the then replacement cost, This significant discount resulted in the option to re-market the lots to buyers or build homes and sell at more affordable prices, while still experiencing generous sales. And we are planet same situation today!
The signs are all there; finished lots are provided from banks or developers on a "short sale" basis and at a rate that may be as low as ten cents on the dollar from both at first the company price along with the replacement value. Building permits and new house construction is at an all time low; yet household formation and immigration continues.
In California, residential development is a really lengthy and complex process often taking from three in order to 5 years (or longer!) to entitle and develop a parcel of land to the point where new homes could be constructed. Consequently, finished lots in California are a rare commodity and command a hefty price in normal economic events. Acquisition of finished lots in the present market and holding those lots for just one to five years offers investors the greatest potential for profit. Once the finished lots have been absorbed, properties with approved tentative subdivision maps and merely need getting the improvements installed will command very best price.
One might say require for housing is not great enough to use whatever appreciation in finished lots in the near term. I would point out that California specifically, and also the nation in general was not building enough homes to meet housing demand before the recession. This housing shortage is only being further impacted by the lack of new home construction created using the current economy. I would also think that society continues to grow through new household formation and immigration. At this time of uncertainty many families are doubling very much save money (ie. multiple generations sharing housing, seeking roommates, and so on.), however as soon as the economy starts to improve, those same people end up being looking for your American dream and begin buying homes-much the equal of what occurred in the past recessions. It will not be long before demand actually starts to outstrip supply, resulting in increasing house values which will, in turn, increase finished lot and tentative mapped projects.
Given my experience, I will say that yes, history does repeat itself. Now is the time for invest in finished lots, and throughout entitled projects shouldn't be far off in order to see significant appreciation on our investment dollars every month.
-Robert Selders, Senior Land Consultant
About Robert: With over thirty-five numerous experience within public and sectors, Bob Selders brings a lot of knowledge and relationships towards the team at Americap Development Partners. Bob started his career in the City of Oxnard in the role of an Assistant Planner, and was quickly promoted to Associate Planner in command over special studies and neighborhood development. He then moved towards the City of Brentwood where he served as the planning Director, and also an interim Assistant City manager. He was instrumental in the preparation and adoption of a particular new General Plan, Redevelopment Plan, and zoning ordinance management for the city.
After serving in the public sector greater than fifteen years, Bob transitioned into private development, eventually becoming the Vice President of Forward Planning for D.R. Horton. His accomplishments in the non-public sector are considerable, including the remedy for a planning team responsible of the entitlements, due diligence and project management software of eighty Northern California residential projects ranging from forty to seven hundred lots. He has also processed entitlements for every variety of commercial, industrial and office properties, including-most recently-a sixteen acre light industrial mixed use project and a forty-three acre industrial park. He has also been instrumental your market negotiation of the many mergers between private development firms.
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