Re: Professional Development vs. Self-Development
From: Sharon Villines (sharonsharonvillines.com)
Date: Thu, 26 Jul 2007 06:15:55 -0700 (PDT)

On Jul 25, 2007, at 9:39 PM, Joani Blank wrote:

So let me pose the question broadly:  In your experience, what are
the advantages and disadvantages of co-developing with an experienced
developer (who would of, course, be hiring a construction or project
manager), in contrast to self-development, where the group finds and
hires the construction or project manager themselves.

There is a lot of stuff in the archives on this so I will just give a few examples. I originally joined a group and Florida that was self- developing and failed, then joined a group in Washington DC that started as a gleam in a developer's eye.

1. Legal papers -- Condo docs and bylaws.

The self-developing group used a well-recommended real estate lawyer who produced a first draft of condo docs that was well over 100 pages long. It was essentially a print out of every clause that had ever been used in condo docs and he charged $15,000 for it. We were totally overwhelmed and had not a clue what to do with it.

The developer had a lawyer he used for all his work who produced a very short, 15-20 page document with alternative passages that we could then modify as appropriate for us. It was written in plain English. His fees were part of the developer's costs and included in what we paid for our units. No extra fees.

2. Architectural Plans

Self-developing group researched all architects in the area who did green building and chose the one with the best recommendations and track record. Because we were small potatoes in his rapidly developing career, he produced plans 2 years late that needed major corrections. He charged $35,000 for the plans and wanted to be paid thousands more to correct them. His designs called for features that the engineers said would have required steel beams making them far too expensive to build. Plus, being 2 years late, meant all the construction costs had gone up and the people who had signed on at the lower prices were priced out. The architect never spoke to either the engineers or the construction contractor until after his plans were completed.

Developer had an in-house architectural staff that produced rough drawings right away and only firmed up architectural drawings when the project was approved by the historic association and most units had been sold. This saved tons of money and allowed him to switch at the last minute the 2 bedroom duplexes to the flats that more buyers wanted. He had a much better grasp of the whole process of designing, selling, and building than the architect had had.

3. Upfront costs

Self-developed. Constant inputs of cash with no guarantees of success. A small portion of the original group actually took on most of these costs but it was tens of thousands of dollars -- all at risk and ultimately lost. Regular members paid monthly dues of $25 (or so) for several years which was all money down the drain even if the project had been built. It was used to hold the property and do PR. The heavy fees were for hiring a person to get the permits done, filing fees for permits (huge), and paying professionals of all kinds. One of the families owned the land and the land increased in value so they were probably not hurt by this but in other cases, the self-developers would just be out the money.

Developer. He assumed all the upfront costs and understood how to leverage money so he got the project built without paying for the land until we closed on our units. All we paid was a non-refundable $500 to cover marketing and membership meeting costs and hold our place in unit selection. Then we put in 5% down when we went to the bank for a construction loan. This was refundable.

4. Time Frame

Self-developed. If the architectural plans had been done correctly, it would still have taken 7 years from start to build. The learning curve alone was stupendous. This is like learning to be your own doctor. How much time do you have to do that? Maybe if you are already a nurse you can do it in time to get to perform your own appendectomy, but do you want to? Most of us are not starting out as real estate development professionals of any kind.

Developer. Very first exploratory meeting called together by Ann Zabaldo was in October of 1998. First move in was November of 2000. It took a bit less than a year longer than expected partly because oil and gasoline drums and more decontaminated soil was discovered than expected. That took more environmental studies and approvals and removals just when the foundations were supposed to go in. And more redesign because it was less expensive to build basements than to fill in the holes again.

The land in each of these cases, Florida and DC, was identified from the beginning so location was not a time-consuming factor as it is for most groups.

===

The developer project is not perfect. A developer does not solve all problems or produce a perfectly designed product. But it is more affordable than the self-developed product unless you have people in your group who are both professional and experienced AND can work full time on the project. In which case, I think, you should be paying them for their time anyway.

Sharon
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Sharon Villines
Takoma Village Cohousing
Washington DC
http://www.takomavillage.org


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