I want to start sharing one of our development projects down in SoCal, partially as review and learning for myself, partially so others won’t repeat my mistake or pick up a good tip here and there. I aim to completely honest, although for privacy since this is still an ongoing project I might not reveal things like its exact address etc.
The Project
We purchased this parcel that used to an old duplex on a 19,000+ sqft lot. I’m going to call this “Project Gruber”, after the villain in the first Die Hard, as I’m playing the role of someone who didn’t actually want to do this but reluctantly having to step in to get people out of the building safely. I was not completely involved with the project from the beginning. We were more just buy and hold investors before. My father came across it during his normal Zillow perusing. The listing claimed the duplex can be demolished and build new residential units. I think our Realtor at that time did verify with Public Works but there’s a chance he didn’t (Lesson #1).
The Realtor introduces us to a land surveyor, Alex (not his real name) who has become friends with our family. Alex said he’ll help us with the plan submittal and my father can learn through the process. The two signed an agreement and we’re off to the races, or so we think (Lesson #2).
Plan approval phase
Our parcel didn’t fall into city jurisdiction but with Los Angeles County Public Works instead (Lesson #3). Los Angeles County does move a little slower so we’re keeping our patience. Alex would periodically update us on what’s happening. We saw the site plan and architectural rendering as the project progresses. A year goes by. Two years go by. About two and a half year in maybe I finally got involved asking a lot more questions. From my knowledge, despite the slower pace, plan submittal should take about 1.5 – 2 years.
I started reading everything I can get my hands on related to real estate development, whether it’s stuff online, BiggerPockets Forums, or actual books (Check out Professional Real Estate Development: The ULI Guide to the Business. It’s not cheap but it’s a great overview and compresses your learning curve really quickly). I also luckily connected with a friend’s brother who has a background in construction management and asked tons of questions that wasn’t clear to me yet at that time. I would go back to Alex and ask what’s happening? What more do we need to do? How much longer before we can pull permit? There were definitely things I learned that weren’t consistent with our friend that did the plan submittal for us’ answers.
Finally Alex told us we can pull permit (or maybe he just got tired of me asking questions). I go down to Public Works and they would say well, you haven’t paid your agency fees yet and we’re missing other information. I would take care of one problem, come back, and they would uncover 2 or 3 more problems.
Anyway, this would continue for about 3 or 4 more months. God bless the folks down at Public Works seriously (Lesson #4). They were actually very patient and helpful. They open at 8am. If you’re in line by 7:30 or 7:40am you can get help first and move on out to take of whatever problem you need to address. If you don’t though you easily could be waiting until 10am before someone is available.
We discover Alex did the address wrong. Say instead of using 100, 102, and 104 Main Street for the three units we’re building. He made it just 100 Main Street Unit A, B, and C. We also found out the plans the Fire Department requires were never submitted so we can’t even pay the agency fees. Highway dedication was not done either. Landscape plans were missing. We also found out we didn’t have to demo our duplex so early–we could’ve waited for the plans to approve before demolition so we lost like 2 years of rent on that. Grading inspection card was nowhere to be found and the best paper trail I could find for that was a proposal or estimate Alex had for us from a year and a half ago. We knew the work was done but it was just never inspected and closed out. Major face palm…
Next time, we’ll talk about what happens after our permits were pulled.
So what did we learN?
Lesson #1 – Trust, but verify. Don’t just take someone for their words. Do your homework. If you don’t know what your plans are for a property along with maybe a couple of different exit options and how you’re going to make money when you’re signing the closing documents, DON’T SIGN!!
Lesson #2 – Ask questions and follow up. I don’t think it would’ve taken as long to get the plan approval if we had periodically followed up with Alex on the progress. Instead months would go by before I would ask my father to ask for an update.
Lesson #3 – Check the local planning agency that’s in charge. Ask around how pro-development they are, if they’re properly staffed, and if the staff are properly trained. Make sure your project timeline and holding costs are consistent with that expectation.
Lesson #4 – If you’re new or not familiar w/ reading zoning ordinances yet, better just go down and get the answer straight from the horse’s mouth. I’ve dealt with different planning departments in different cities by now. Sure, sometimes they’re slammed but in general they’re professional and the quickest way to get the answer you want.
