How do I Get Started as a Small Developer? Find your “Farm”.

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Dallas Small Developer Nathaniel Barrett out tending his farm. After walking to work through the area for a while, he bought a house in his farm and has now purchased the scruffy one story commercial building on the right side of the photo.
I got an email from an Architect in Florida looking to get started as a small developer.  She wanted to know how to pick a property to get her new enterprise started.   We always recommend that you think beyond the individual building and commit to the neighborhood as your project. Stake out a geographic area as your “farm”  the piece of town that you are going to know better than anyone else.  If you cultivate that farm, meet people, build trust with your neighbors and the folks who might oppose new construction , you have an edge that a big operator from out of town will not have.
Where should you look for your Farm?  No, I am not talking about an actual agricultural farm.  “Farm” is a metaphor for a neighborhood you are serious about cultivating long term.  Pick a place that you care about, that needs you.  For example, I really care about my old neighborhood; Prospect Park in Brooklyn -but Prospect Park, along with the rest of Brooklyn is booming.  So that place does not need me. Find a place in between where cool stuff is already happening and where things are still kinda lousy.  Work the seam.  If you can find a piece of a neighborhood that is on the seam between the two, you can have a significant impact and have real upside for the value of the buildings you build or renovate.
 Look for an area with multiple buildings to renovate and repurpose, or multiple vacant parcels to build new infill buildings on.  Map out your various opportunities, which properties are listed for sale.  For properties that are off the market, you dig into the local county assessor or recorder’s office records to learn when the property last changed hands, are there any liens filed against the property, and who is the owner of record.  Sometime the County Assessor records are available online, but even if you use the online resource, go down the the assessors office and meet some people.  Learn how your local operation works.  Print out some physical maps to mark up as you walk or bike around your farm.
Commit to your farm. Buy a house in your farm, renovate it, and live there.  Look for something you might divide into a duplex or perhaps a small existing mixed use building where you could live in one unit rent-free while figuring out your farm.  Once you become familiar with what your likely rents, likely hard and soft costs to build or renovate might be you will be able to evaluate multiple properties and rank them for which ones you want to pursue first.  Working the project(s) on paper is the best way to get started. There is no risk other than your time and attention.
Get out and meet people.  Walk around.  Put your self in a place where you are likely to have some chance meetings, the farmers market, a coffee house, a neighborhood bar, a hardware store, a church, a community meeting, anywhere that helps you meet people who live and work within your farm.

The First Year of Small Developer Activity

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Attendees; First Small Developer Boot Camp in Duncanville, TX August, 2015

 

I tend to let too many files accumulate on my computer desktop.  As I was clearing out files today I came across the photo above and the text below.  As you can see from the photo, we did manage to put on the first boot camp in Duncanville.  By the end of 2015 we had done six bootcamps and workshops and launched non-profit to coordinate the effort to cultivate Small Developers around the US, the Incremental Development Alliance (IDA).  Next Tuesday, June 7th in Hamtramck, Michigan we will running the 7th event of 2016 the day before the 24th gathering of the Congress of the New Urbanism starts up on June 8th.

In addition to running the one day and three day training events, IDA along with Midtown, Inc has been awarded a Knight Foundation grant to do a deeper diver into the Midtown neighborhoods of Columbus Georgia, providing 18 months of extended training and mentoring for local small developers.

None of this would have been possible without the hustle and hard work of local sponsors and volunteers in each of the cities that hosted us and the ongoing efforts of the IDA staff and board.  Strong Towns helped us get started, hosting the boot camp registration for the first couple events on their website.  Lynn Richards and the staff at CNU have been tremendously supportive as we continue to figure out how to scale up the Small/Incremental Development Effort.  The CNU’s Project for Lean Urbanism was the genesis of this entire effort.  The time we spent with the Lean Urbanism Working Group exploring what it would take to Make Small Possible made it very clear that we need a new business model for development, That shifting the scale of the development enterprise was going to be critical to building better places.   Thank you everyone.

 

June 5, 2015

Things are moving FAST with the rapidly expanding Small Developer/Builders Facebook group that we set up last April prior to CNU 23 in Dallas.

I have heard from a number of group members via email and phone calls that they would be interested in a hands-on workshop on basic skills needed as a small developer builder. There is an effort percolating to hold a one day workshop for Small Builders in Atlanta the day before the National Town Builders Association (NTBA) Fall Roundtable October 16-18.

But that’s all the way into late October and folks are pressing for something much sooner.

I think we can put this together in the Dallas area rather inexpensively. If the folks attending cover their own travel, lodging and meals, if we can find a venue at modest cost. It could be a very Lean affair.  A meet-up with other folks considering or practicing as Small Developer/Builders. Connect with some mentors, roll up our sleeves and get some skills.

Here’s what we are thinking for content:

  • BUILDING FOR-RENT VS. BUILDING FOR SALE PROJECTS.
  • HOW TO DO BASIC MARKET RESEARCH.
  • PRO FORMA BASICS, SORTING OUT YOUR DEAL ON PAPER.
  • HOW TO BUDGET FOR HARD AND SOFT COSTS.
  • OPERATING EXPENSE BUDGETS AND THE PROPERTY MANAGEMENT BASICS.
  • SITE SELECTION – EVALUATE SEVERAL SITES TO FIND THE BEST ONE TO START ON.
  • HOW YOUR FINANCING REQUEST LOOKS TO YOUR BANKER.
  • NAVIGATING THE APPRAISAL PROCESS.
  • HOW TO PITCH A DEAL TO AN INVESTOR.
  • DEAL STRUCTURES; ALIGNING THE INTERESTS OF PARTNERS.
  • POP-UP RETAIL AND STREET MARKETS; HOW TO CULTIVATE TENANTS (WHEN YOU HAVE NO MONEY).
  • UNDERSTANDING FHA LOAN PROGRAMS 203(B) AND 203(K) FOR 4 UNIT PROJECTS.
  • DEALING WITH CONSTRUCTION IF YOU DON’T HAVE A CONSTRUCTION BACKGROUND (AND EVEN IF YOU DO).
  • COMMON SENSE DESIGN STRATEGIES AND WORKING WITH ARCHITECTS AND ENGINEERS.
  • MULTIPLE ON-RAMPS, SCENARIOS FOR HOW TO GET STARTED AS A DEVELOPER/BUILDER.
  • A STANDARD 4-PLEX DEAL; ALL RESIDENTIAL OR SMALL MIXED USE BUILDING.
  • A STANDARD COTTAGE COURT DEAL.

What other content should we cover?

We are thinking folks would arrive in time for food and drink on Friday evening, leave after lunch on Sunday.  We are doing this on August 14-16,  Who’s in?

 

The Zoning Code makes the Comprehensive Plan Illegal? WTF?

 

 

 

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I can’t build what the Comprehensive Plan requires, because the zoning won’t allow it? WTF???!

 

Warning! Planning Geek stuff ahead….

Most state have a law on the books that requires municipalities to adopt a Comprehensive Plan (called a General Plan in California) that will guide local investments in transportation, schools, parks, fire trucks, hospitals, and sewer plants.  Once the Comprehensive Plan (Comp. Plan) has been adopted, the municipality is supposed to revise their local zoning codes and development ordinances to bring them in line with the goals and policies of the Comp. Plan.  So the Comp. Plan is the big idea, the thoughtfully considered suite of policies that should guide the finer-grained rules and regulations that developers are required to follow if they want to build something.

Here’s a common problem.  After going through a long string of cathartic public meetings, charrettes, visioning sessions, etc. to prepare the Comp. Plan, Downtown Master Plan, Corridor Plan, etc., the mere mortals that staff the local planning department or sit on the planning commission and the city council are kinda burned out.  The unglamorous task of revising the zoning code tends to get delayed or forgotten.  Sometimes there is  just no money in the budget to get the zoning code revisions done.

If developer shows up proposing a project that is in line with the general policies of the new Comp. Plan but violates the specific rules of the old zoning code, the only path forward is some sort of Planned Development Permit (PD), Planned Unit Development (PUD), or some similar additional process designed to allow greater flexibility that is allowed under the letter of the zoning code.  PD’s and PUD’s require require additional applications, additional review by the planning commission, and typically a public hearing.  In the meantime, if someone wants to build some crappy project that violates the policies of the new General Plan, but is specifically allowed under the old zoning code, they could do that as an as-of-right project. That’s just bullshit.  Imagine how local residents who participated in all those visioning workshops for the Comp. Plan are going to feel when they see that crappy project get built.

I think that putting this statement on the front cover of every Comp Plan to save people a lot of time, money and frustration:

“WARNING! This is a feel good scam. We have no intention of actually changing the rules to allow you to build any of it without special permission and a number of public hearings with local residents who have not read this document.”

If your community wants to see the vision of their Comp. Plan actually get built, get serious about changing your zoning code.

Why is it so hard to build a decent building?

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What will it take to return scale and care to building?

In a recent Facebook post my friend and colleague Steve Mouzon, author of Original Green, posed an important question:

“Why is it that when there is an attempt to recover a lost tradition, that which is built is not the tradition but rather a cartoon of that tradition –have we lost the ability to see clearly?”

I think our habits of building are fractured and out of sync. We can’t seem to capture the rhythm of the mechanics of design and construction well enough to transcend a stilted mechanical approach. The people who built the traditional houses of the late 19th and early 20th centuries had habits of building that were reasonably intact. We try our best to be fluent in a language that, if not dead is at least seriously wounded. While some struggle to produce drawings that communicate well, others struggle to read them well and then launch ahead sure that they’ve “got it”. We trust our brains when we probably have little reason to. Everyday tradeoffs in building present themselves with reliable frequency. We are not wired to be obsessive or hyper-vigilant when performing carpentry or ordering lumber. At some point, you believe that you have a handle on the task at hand. Even hearing someone explain that “We do this because…” can feel abstract and a somehow disconnected. Skipping over the surface of a tradition feels pretty profound, so you don’t know that you are supposed to be diving deep. We are thrilled at building something that seems darned good compared to today’s usual habits of building, so we can’t see a more sublime experience just a few steps away.

Imagine that you are a housewright in 1889. You spent the winter producing window sashes, doors, moldings in your barn with the collection of hand planes and the Asher Benjamin handbook you inherited from your dad. In the spring you lay up a stone basement and start framing a house. When it comes time to install those windows, doors and trim your grasp of to how the pieces go together makes so much more sense than someone setting windows and coping trim today. Whether in the design studio or the field, it is rare for us to get Malcolm Gladwell 10,000 Hours in on the full arc of the work, on the habits of building. So, yes, Steve we have lost the ability to see clearly.  These days we see as if through a glass darkly. We need the discipline and structure of craft and habit to recover our sight. Today the flow that emerges from that discipline and structure is not available to most. On a good day some talented people provide us with some well-intended choreography of a dance few of us have ever seen performed by someone with real mastery.

She tells this story way better than I do…

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Sarah Kobos, the Bard of Tulsa

 

Writing is hard.  Sarah makes it look easy.  Take a look at how she describes the mechanics of a team exercise from the Incremental Development Alliance’s Small Developer Boot Camp.  She lays out that rather technical set of tasks and rolls right into the real world limitations of the moldering zoning codes you find in most cities these days.

Accidental Urbanist

My favorite quote from Sarah:

“Everyone has sexy dreams, but as a developer it’s important to maintain a long-term, monogamous relationship with math.”

 

 

Building Houses or Condo’s for Sale? Bad Dog Ginger!

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The wisdom of Gary Larson’s Far Side
This afternoon I got another phone call from someone convinced that they should develop condominiums and sell them. I am really struggling to find a better way to communicate on this really basic point. I feel like the guy in the Far Side cartoon above.
 
If you have the know how required to produce buildings that people live and/or work in, using that very valuable resource to produce houses or condos that you sell to people has a huge opportunity cost.  Opportunity cost is a big deal, as in lost opportunity and wasted opportunity.  What else could you have been doing instead of building and selling?
I cannot emphasize this enough. If you have the wherewithal to build something, Don’t sell it.  Hold onto it and rent out space in your building. The market for new or renovated rental buildings is hugely under-supplied in most markets, particularly in anything even remotely resembling walkable urbanism.  There are lots of places where a couple of decent buildings will have a wonderful effect upon the neighborhood.  The people who fill in the missing teeth in the neighborhood will do well, while doing good.
 
Our culture has created completely unrealistic expectations for what is supposed to happen when you buy a home. Avoid putting yourself in a place where you have to deliver on all the delusional nonsense that fills the heads of people who watch too much HGTV. Build to hold and rent. Build in places where the amenities are exotic stuff like proximity to transit, day care, $2 coffee and a genuine local bar.

The 20K House is Bullsh*t

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Two Rural Studio Houses recently built in the Serenbe Neighborhood near Atlanta for $135,000.

Fast Company put up a story that won’t go away.  This sloppy clickbait piece does not help the cause of building housing at a price that working people can afford.

Here is the FastCompany piece: It costs $20,000 but it is nicer than yours

Here is a local piece From Arts Atlanta that puts the cost of building two of the $20K houses at  $135,000

So what’s the deal?  The folks running the Rural Studio in Auburn University’s Architecture Program set a goal of producing a house with a mortgage payment that someone living on Social Security in Hale County Alabama could afford.  That’s how they arrived at $20,000 as the price of the house.  The target price.  The aspirational price. The price they hope to someday achieve.  They have not done it yet.  Not once.  It would be good to refrain from giving people the impression that they have delivered the house for $20,000, if in fact they have not. Link to the Rural Studio 20K House

What they have managed to do is generate a lot of press that give the casual reader the mistaken idea that the 20K House actually only costs $20K and the Fast Company piece is just the latest bit of lousy fact checking to reinforce that misconception.  Their idea is a well-intentioned one with a couple of important missing pieces. The Rural Studio site breaks their aspirational $20,000 number down into $12,000 for materials and $8,000 for contracted labor and profit.  Houses and mobile homes for that matter in Hale County need a municipal sewer connection or septic tank and a municipal water connection or well.  The cost of drilling a proper cased well, installing a pump , and building a septic system in Hale county is between $12,000 and $15,000. So even if $8,000 is enough to cover a builders labor cost, workmans’ comp. insurance, general liability insurance, office overhead, and profit on the house (and it isn’t) the project is $12,000 over the aspirational $20K budget if the homeowner does not have to pay for the land it will sit on.

An important lesson to teach young Architects in any studio course is that you should not leave large numbers out of a building budget.  Math is unforgiving and cannot be erased with good intentions or a lot of PR.  Maybe there is no such thing as bad publicity.  If that is true, I guess the Rural Studio Folks won’t mind this blog post.