Randall Benderson has seen people purchase development sites again and again, believing they found a scoop, only to find that it wasn’t that good of a deal after all. This is, he believes, because they do not exert proper due diligence. They forget to make a site evaluation that is appropriate to their plans. And they don’t have checklists. Benderson himself feels he has a proper strategy in place.
Randy Benderson on Choosing Development Plots
Benderson, like other developers, will first make an initial calculation on a new commercial retail project. However, he sees this as a draft only. From there, he will investigate the different planning and building codes in the area he has chosen, such as Phoenix, Sarasota, or Tampa Bay, and will then determine whether it is a feasible option. Once that is completed, he will account of the space required for things such as car parking, roads, open landscaping, and so on.
He will also work together with an architect and a marketing research team to determine what each unit he wants to build will look like in size. This will then help him to determine how many of those units can fit on the site. The architect designs the initial concepts, so that a real visual is created.
At no point during all of this will Benderson already have acquired the site, or even made a proposal for a deal. Hence, if he finds that the site is not appropriate, or if news breaks of new economic fluctuations that can be of importance, he hasn’t lost anything yet.
Essentially, the process must start with a feasibility study, as described above, before the real number crunching will start. Some developers don’t like to complete the feasibility study because it takes a lot of time, and that could effectively be time wasted. However, Benderson prefers to see it as a type of insurance, stopping him from buying into a huge mistake.
It seems that Benderson’s ideas aren’t unique. Indeed, entire software packages now exist that enable people to complete these types of studies. He recommends prospective real estate developers invest in such a package, as they not only save time, they also significantly reduce the chance of human error. Good packages allow for a range of variables to be included, which means the feasibility study can go deep into important issues, including environmental risks and more. Should, based on that study, the developer decides to go ahead, the information entered into the system can then be used for the actual costings as well.
A final benefit of doing this, believes Benderson, is that it makes it a lot easier to secure finance as well. A feasibility study is, in effect, a concrete business plan that has looked at all angles. People really have nothing to lose by completing this before entering into a land deal, and everything to gain. It is a system that has worked very well for Benderson over the past number of years.