Incremental Development does sound like you need a lot of capital and that there would be a lot of risk if you don’t know what it is. If you didn’t know what indoor plumbing is and how it works, that might also sound like a crazy risky idea. But Incremental Development is not that complicated nor that risky. The biggest barrier to entry is the initial step. What is the road map? What is the territory? It’s a black box in a lot of people’s minds.
Developers are held in very low-esteem. I see that as more of a feature than a bug because if the bar is low, it’s pretty easy to under-promise and over-deliver. On the spectrum of all possible developers that might arrive in your neighborhood from Mahatma Gandhi to Darth Vader, people expect a developer to resemble Darth Vader.
A small developer just needs to be a noticeably less shitty version of Darth Vader.”
I think there are lots of great precedents for small single story main street buildings that work well. Above are some studies David Kim and Will Dowdy did on small, shallow storefront spaces that could be used as parking lot liners or in conjunction with small apartment buildings and cottage courts located behind the small commercial/flex building to provide mixed use without requiring the use of commercial steel pipe fire sprinklers that can be required if the residential and non-residential Occupancy Types were combined into in one mixed use building.
The intent was provide a wide/shallow space that could be flexible. We settled on a depth of 26′ as this leaves an 18′ dimension between the 8 x 8 accessible restroom and the storefront. We were also looking to keep any columns or other intermediate structure out of the floor plan and 20′-32′ of depth is readily spanned without going nuts on the truss design. You can get pre-engineered bar joists at 40′ long, but we wanted to keep the construction technique within the skills of residential trades.
Keeping the depth modest allows for daylighting of the space from a transom and light shelf over the storefront and awning. Spaces this small are easily heated and cooled with a ductless mini-split heat pump/air conditioner.
Using a single pitch roof truss, sloping from the street side to the rear, with a parapet on the street side can provide lots of room for signage, while screening compressors or kitchen hood fans from the street view.
Buildings that are flexible enough to house small and inexpensive workspace for retail, services, food and drink, etc. should be in the Small Developer’s tool box. You may know an under-utilized parking lot that could be lined with something like this. Could be good way to follow up on testing the location with some food carts.
Steve Mouzon has some very interesting thoughts along these lines. His blog has better production values than mine does, so I encourage you to click through and check it out. Steve Mouzon’s Blog Original Green
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?
If a picture is worth a thousand words, then the right diagram is worth at least ten thousand. I am very grateful Jim Heid of Urban Green has boiled down the difference between Large and Master Planned Development and Small and Incremental Development into the series of excellent diagrams above.
I recently had a conversation with a bright guy in a Masters in Real Estate Development program at a serious university. He was wondering if a Real Estate Investment Trust (REIT) would be a good vehicle for people in a local community to be able to invest in small projects in their neighborhood. Just to set things straight, a REIT would not be a good vehicle for this as a REIT has to have a lot of property under management to justify their existence and overhead, so the structure would be way beyond the scale of small projects in a specific neighborhood. Investors would own shares in an outfit that owns a large portfolio of a specific type of real estate.
-But the conversation reminded me of Jim Heid’s diagram. The kind of local in the neighborhood projects my grad student friend was describing belong in the lower left quadrant of Jim’s diagram, the Small and Incremental/Entrepreneurial and Bootstrapped territory. Ownership of real estate by a REIT belongs up in the Corporate and Institutional/Large and Master Planned upper right quadrant. We might want to bring established tried and true tools scaled for the upper right quadrant to bear on projects in the lower left, but often the scale is just…off. I think we can call that a Quadrant Foul.
Rethinking the development business model for Small Developers will continues to uncover habits that may serve folks doing large project well that need to be substantially retooled to work in small projects, or they may just need to be set aside as because they are not fit to the purpose.
In most places the demand is large and the supply is pretty damned small. So just how large is the demand? If we were able to wave a wand and redirect the entire US housing industry to deliver only new rental housing in walkable urban places tomorrow, we would not catch up with the demand until 2050
If you understand urban places and have the ability to produce modest buildings for a living, I encourage you to figure out how to build apartment buildings and mixed use buildings, rent them out and and hold onto them. You should look for opportunities to do this in walkable or even marginally walkable places. Avoid completely car dependent locations so you don’t have to build swimming pools nobody uses.
If you are a contractor, I think this might work out better than building for other people. If you are an Architect or urban designer I think this will work out better than performing fee for service design or consulting work.
If this seems like a crazy idea, please read Arthur C. Nelson’s book Reshaping Metropolitan America and give it a a little more consideration.
Go ahead and download it and poke around. At a minimum, cruising through the spreadsheet will make you want to read the book , where Dr. Nelson very helpfully explains what all these data mean. I suspect that if you are half as geeky about this stuff as I am, you will hone in on the place where you live to see what the housing future holds for a place you care about.
You can look up your Metropolitan Statistical Area (MSA) and find out the annual demand for new rental apartments is going to be in your place. Then hop over to the US Census website to look at how many multifamily building permits were issued in your county in 2014 and 2015. http://censtats.census.gov/bldg/bldgprmt.shtml
For example, I live in Albuquerque. In the Albuquerque/Bernalillo County MSA, the annual demand for new rental units, according to Dr. Nelson is 4,000 units. Imagine that a quarter of those units get delivered by the apartment fairy in the form of converted single family houses and the demand number comes down to 3,000 units.
In 2014 there were 400 units built in Bernalillo County, so the short fall of 2,600 would roll over into 2015. add the conservative number of 3,000 units for 2015 and that comes to a demand for 5,600 new rental units. I check in on the permit activity for the City of Albuquerque and the number for the city (admittedly not the entire MSA) for 2015 was 570. So now the demand for 2016 is something over 8,000. Vacancy for apartments in Albuquerque over the last couple years has been less than 2% (–about what you would see when apartments need to be repainted and re-carpeted between tenants) Rents have gone up 5-10% a year in this market with the higher rents in the walkable parts of town.
Is your area any different? Do you see an opportunity?
When I hear the question “How Do I get Started as a Developer?” it is usually followed by a string of questions which amount to “Can you draw me a map that will guide me through every detailed step to becoming a developer?”
People who are interested in this line of work come from a wide range of starting points. A lot of them already have a fair amount of skill in one aspect or another of the built environment. They may be very accomplished in one or more specialized areas as a contractor, broker, planner, activist, architect, or property manager. They know enough about how things work to recognize that they have a lot to learn outside of the field that originally led them to development.
So let’s group the skills a developer needs into 7 groups:
Urban Design, Site Selection, Site Planning and Civil Engineering.
Deal Architecture, Pro Formas and Finance.
Construction and Construction Management.
Marketing, Sales, Leasing and Property Management.
Communication and Follow Through.
Very few people master all of those skills. If you start with small projects, you can gain an overview, and understanding when they are needed at the various stages of a project. You get a sense of the basics for each skill set. If you don’t have the skill which the project requires, you can’t go without. So you should borrow or rent the needed skill. Look for people who are genuinely interested in your project and who are actually happy to teach you about their specialty. I figure a developer does not have to know everything, but they should have a good idea who to call before it is too late.
After a number of Small Developer Boot Camp (calendar here) Jim Kumon and Gracen Johnson have put together the graphic above which has three types of skills and activities allocated over 5 phases of a development project. I think it is a substantial improvement over the list of 7 skills because it give the reader a sense of when they need to know what, or when they have to find help as they move their first project from idea into an actual building. This is a work in process, so comments and critiques are welcome and needed. What do you think?
Some members are curious lurkers, some are practicing developers, and many are on the fence trying to figure out what it would take to make the move from their current day job into developing small scale, incremental projects. We have seen several clusters of folks connect through the group and decide to meet up in person. It’s been quite marvelous to watch the group grow in number and see the discussion move past daily posts of whatever is on my mind that I think might be useful. Click the link above and ask to be added to the group if this sounds like something you want to explore.
The August Small Developer Bootcamp in Duncanville has been capped at 75 participants. There were 56 people registered as of lunch time Friday. So just 19 spots are left. If you were intending to join us in Duncanville, now is the time to go over to the registration page and sign up. It looks like the event will fill up at the early bird registration price of $100.