Shallowminded14 said:

---

I have multiple years of construction experience and had a former colleague reach out to me wanting to invest his own capital into buying land and me managing the development of said land and construction of new homes.

Has the ship sailed on this type of business due to interest rate hikes / recession predictions? Geography this would take place is in SW Houston between Houston and Galveston.

---

Well Galveston is south east of Houston

If you have to ask the internet if the Single Family Residential Developer is a dead business concept you should stay out of that game.

My dad is a SF developer. Does your colleague realize how much money this takes? Serious serious money just to get the lots in place.

The answer to your question is that the ship hasn't sailed.

Not to be snarky, but the people above are correct. If you're asking the internet then this is a bad idea.

The story has already been told. Developers keep on putting out incredible crappy spec homes b/c ...people buy them.

If you want to develop crappy homes on cheaply acquired land then you will make money

If you want to develop high quality homes then you will need to buy expensive land and triple the construction budget to make money.



Otherwise you will fail.

Growing up, I always dreamed of being a developer. It's not like wanting to be a banker, or firefighter. There just are not that many people in the business, and I was never close to one. I also don't come from FU money, and that seems like the even larger barrier to entry. Don't let anyone shame you for asking. I have learned a lot just by reading this forum in passing.

My limited knowledge that may/may not help

- It's expensive as hell to cut in roads and utilities. This is the part you probably know, from having experience with that side of the business. I have always thought it was funny to hear people complain about the cost of a lot in comparison to the going price for an acre of land.

- The part you might not know, is the land cost and the expense of physically developing it is just the tip of the iceberg. The engineer and attorney fees can be eye opening. You have carrying cost while getting the development approved with the city/county.

- There is a ton of risk. We are in a boom like I have never seen in my lifetime. Every developer looks like a genius right now. Over the years I have seen many developers go broke, or have to sell at a loss. Somebody finds an endangered or protected species on the land, happened by the cap rock development. River place lake was done wrong and won't hold water with "Lake front" lots surrounding it. King Oaks was a failure and sold for a song, they were just a little too early. Dove Crossing was a failure and sold for a song. It goes on and on.

Buying a 4-5 acre pasture and subdividing 1 acre lots IS developing a neighborhood. You still have nearly all the same steps that need to be taken and they will all have a minimum cost that doesn't scale linearly with the number of lots involved. This is why full time professional developers don't do 3-4 lot developments.

This isn't a construction project. It's due diligence, surveying, civil engineering, real estate law, permitting, platting, construction, marketing, and real estate sales.

Most of the folks I've seen do this at all successfully were partitioning family property rather than selling it outright. That made their carrying costs very different than yours would be.

Some suggested homework: go pull all the plats filed in the County you're thinking of developing in over the last 5 years and see how many look like your plan. Call a few of the developers that did those plats and ask them about the experience. If your plan is Harris County, strike that and go look into developing a MUD so your due diligence learning curve runs smoother.