Architects as Contractors or Developers


I don’t know if this is appropriate for me to do or welcome, but I want to reboot this subject. I realize that this subject has been discussed elsewhere and before but I seek perhaps a more concentrated exchange.

I had a 40 year career as an Architect-Contractor-Developer and I found it to be rewarding in many ways. I sought control over my work and found it. I want to start this thread seeking your ideas, thoughts on it as a career path, talk amongst yourselves on the subject and of course questions are welcome.

What about the idea of architects reclaiming the title MASTER BUILDER?

Jul 26, 14 8:18 pm

Ooh, master builder. Sounds empowering.

Jul 26, 14 9:24 pm  · 

This is what I'm working towards.  As of now I have done a few remodel flips ( most the work i do with my own hands which has been a lot of fun and great learning experience) but seems like a financial leap to buy land and get a construction loan.  Any tips on financing?

Jul 26, 14 9:40 pm  · 
wurdan freo

Master Builder is way too close to Master Bater (sp?).  Why not just call yourself a developer and leave it at that. Such an identity crises with this field. If architects spent half the time they spend in studio studying real estate and finance, it wouldn't be a complicated issue at all. Better yet, study half the time and do an actual project. Realtors without college degrees become successful developers all the time. Idiots with money and/or connections become successful developers all the time. 

I would recommend doing as much as you competently can on a small project to start... just to learn/have an appreciation for the entirety of the project. You can make a lot of money on a small project. Just don't make it your entire thesis project and don't make DIY your business model. 

Jul 27, 14 11:34 am  · 

Just trying to steer the discussion…jla-x to your question on tips for financing. To get financing in today’s environment requires equity (down payment). Equity does not have to be cash. There are many alternatives, here is just one example. Find a piece of land, not too big to start, that is lingering on the market, of course something you can develop a vision for. Use your talent as an architect to create some simple sketches and look up the owner and tell him you have some ideas on how he could unload the property. Take him to lunch and show him your stuff and enthusiasm and suggest being partners to develop the property with his share being the land value and your share being your architectural work. Suggest he develop the property with you, add value to the property and sell his interest in the property later…he’ll make more money that way. Those things combined would be the equity and trigger the financing.

Jul 27, 14 12:46 pm  · 
pale shelter

that would be a great option and opportunity Carerra... but are you suggesting the Owner go in with you only on the value of the property? or are you suggesting 'he provides the land' and reaps the rewards of the final sale value ... say 50/50 or proportional to land cost/value ? Wouldn't this still require you to get a substantial loan for the construction? There's an 'opportunity' i think down the street from me where a decent building only has the first floor rented out to a outdoor recreation / kayaking rental shop ..the upper 4 floors are just storage and empty.. on the 'edge' of our popular neighborhood downtown . If this could support condos or upper tier rental on a conversion... am I fronting the construction cost and he's saving me on the land ? That'd be great, but considering land costs should be somewhere between 15-20% max per overall development costs ... I'm still looking at a hefty price for construction loan. Typically aren't there separate loans for obtaining land and then construction? ... and then once project is up and renting out ... pay off the 18-month construction loan and re-finance with a new loan based on the new value and income? ...thanks!

Jul 27, 14 5:43 pm  · 

pale shelter, the example was raw land – build where you could mould a project with a budget that was 20/80 or 25/75 where the appraised value of the land + A/E fees equal 20% or 25%. The money that the bank provides is the 80% or 75%, which is the cash you use to build it.

If a sale occurs later this 20% or 25% would be left on the table at closing after the bank is paid back and the land owner would take his percentage and get his money back for the land. It’s a way of getting the land sold. Hopefully if they fill it with tenants and through the natural benefits of good design the property will increase in appraisal, sell for more and both walk away with more.

A rehab of an existing building is a little harder with this scenario because the square footage is fixed and is a little harder to mould. You just need to run numbers and see. Having a building with an existing income stream is a plus and the bank will like that. The base appraisal will likely be a little more complicated here; they will probably run the appraised value of the lower floor based on income producing real estate and the upper floors based on replacement cost.

Construction loan vs. permanent loan is simply semantics. The 80% or 75% they give you will initially be in the form of a construction loan as a vehicle to pay it out in monthly draws and the percentage of interest is higher to pay them back for the loans administration during construction. When construction is 100% they will want to convert this loan into a permanent mortgage (loan) that they can sell on the market.

Reappraisal at completion is key. Appraisals of building plans are always lower than the finished product. Your construction loan appraisal of the upper floors will be based on the value of the construction, empty. Later after adding tenants the appraisal will shift to an income producing appraisal. This move will automatically add to your equity and help put you in a position to parlay to another project/opportunity.

Also remember to add in development fees in addition to your A/E fees, you are serving as the developer and your time/expenses in this work are part of your equity too.

Jul 27, 14 8:27 pm  · 
wurdan freo

Here's a scenario I have penciled out where I was planning on approaching the land owner with a similar proposal. He recently had it listed for more than he purchased for. The listing is expired. He purchased at the height of the boom and is still underwater on the cost of the land. This skews the proforma, but potentially makes him more interested in doing a deal.  Should it reflect the cost of what he paid for it or the current fair market value?  

Cost he paid for it

Land     $1,300,000

# of Units  SF    $/SF

Units 5  1600 $  122.50 $            980,000

Project Management  15% $            147,000

General Conditions     7% $               68,600

Design and Permitting10% $               98,000

Contingency                20% $            196,000

Total Costs thru Construction  $         2,789,600

Development Fee10% $            278,960

Total Project Costs      $         3,068,560

Rental Revenue    

Annual Revenue/ Unit  $               69,859

Total Annual Revenue   $            349,297

Operating Expenses 30% $            104,789

Net Margin $            244,508

Annual ROI   8%

Sale at x% cap rate 6.00% $         4,075,128

Gross Profit on Sale $         1,285,528

5 year average return after sale  14%

Current Fair Market Value

Land $            900,000

# of Units      SF$/SF

Units5  1600 $  122.50 $            980,000

Project Management15% $            147,000

General Conditions7% $               68,600

Design and Permitting10% $               98,000

Contingency   20% $            196,000

Total Costs thru Construction  $         2,389,600

Development Fee10% $            238,960

Total Project Costs $         2,628,560

Rental Revenue    

Annual Revenue/ Unit $               69,859

Total Annual Revenue $            349,297

Operating Expenses 30% $            104,789

Net Margin                       $            244,508

Annual ROI        9%

Sale at x% cap rate 6.00% $         4,075,128

Gross Profit on Sale $         1,685,528

5 year average return after sale 20%

While neither of these scenarios is super enticing, it definitely leeds me to keep the Project Management Fee and Development Fee and purchase the design services from someone else. I'm happy to delegate the services and pass the fee in exchange for the liability. 

Jul 28, 14 12:24 am  · 

Wurdan freo, thank you for your contribution. Looks like you know what you’re doing; posting a sample Performa is helpful to others. Sorry can’t help people with Performa’s; brains broke in that regard. But I can help answer your questions/address your thinking.

You are correct he should be interested in doing a deal. Right now, like many, he is screwed. Putting a sign up with a Realtor has already proved this won’t work. At present appreciation rates it could take years to get him back up to where he started. He needs to find ways to increase the lands value and your deal will make that happen.

You/he can’t go into this based on what he paid. You guys need to get a formal appraisal, not go by what you both agree is “current market value”. You’ll need this too with the bank to shore up your Performa, and use this number for your deal. What you are offering him is a way out and he needs to let you do your work that will add the value to his land so he can recover it later.

Jul 28, 14 1:10 pm  · 
pale shelter

wurdan freo: yes, thanks for the numbers! probably the first dollar figures on architect ever in regards to business and money making ventures !! lol

So after only studying for a couple weeks on this subject; I find your land cost to still be outrageous in proportion to your overall development cost. Unfortunately in this specific circumstance you're at odds with the property owner having over paid. Understood, but putting that aside and talking hypothetical with your numbers as 'an exercise' ... 

  • Is Cap Rate of 6% too greedy / not conservative enough? I thought I picked up somewhere 6% was a seller's market (lucky to find a buyer) and anywhere between 8 and higher was a better buyer's entry. I may be wrong; but considering cap rate doesn't include lending costs, a buyer would be looking at a very low ROI unless he/she buys in cash... correct?
  • $3.62/SF rent price?! where is this located?! So we're either talking major luxury rental, San Francisco or Manhatten ($3.75 avg / SF) and not my midwest city at $2.40/SF for 'luxury' market rate which is still very high per nation average.
  • Can you really build luxury apartments at only $123/sf ?! Here in midwest; we're typically around $180/SF for market-rate...and that's at the economic scale of 200 units development.
  • Only 5 units? How would you figure for vacancy rate on such a small / risky unit count? I can only foresee a pre-sale condo strategy here; rental seems risky at this cost in my opinion.
  • In this example; are you acting as developer and contractor? ... and thus keeping those fees to yourself? Any conflicts or overruns with cash I assume you'd be taking from here; of which there's a decent amount of money there combined. And I agree, lose the liability and hand the architect stamp over to someone else. 
  • What would be the exit strategy here... sell right away or after 2 years? If you wait 2 years do you have to pay capital gains? Or since you're not living there... it's all taxable income? Or can that money go into another property development investment as tax-free capital. What is a typical strategy here? Many just hang on and keep the rental income for the long term..10 years + and then sell...

Appreciate any responses. Great stuff.

Jul 30, 14 1:04 am  · 

May be too difficult to analyze a Performa long distance, it’s done but you need the whole package to reference from. I saw the land/building cost and calculated a land ratio of 46%. Thought it to be really high but I did some reading and found ratios in higher priced markets near job centers like coastal California, desired areas of Washington D.C., New Jersey and New York to be 50%. Then I saw ratos in areas where land values are less aggressive like Florida, Texas, and the Midwest that tend to be in the 15% to 20% range. I tried to help a lady developer on another page later only to find out her proposed project was over seas.

Reviewing/commenting “hypothetcly” or as “exrecise” here is great, good way to vet a project without prejudicing a project in its local. Questions don’t have to be answered, just hearing the questions is helpful.

Jul 30, 14 11:56 am  · 

FYI, there are two ways to bring in a landowner on a development deal. Partnering with them for a percentage, as described above, is one method. The other, which can also be counted as equity when securing construction and permanent financing, is called "seller subordination." Basically, you get the property under contract by purchasing it under a promissory note or controlling it via transferable option, and get a formal agreement from the seller to subordinate their creditor position in the transaction to the prime lender's position, giving the prime lender first lien. Using this strategy, you can often get a significant part of the land value considered as equity for financing, even if you don't own the property outright.

Most developers prefer to use subordination rather than partnering with landowners, since it's simpler and doesn't complicate the project with junior equity positions. If you've got the property under contract or purchase without subordination or a partnership agreement, the prime lender will insist on wrapping any land financing into their loan, cashing out the seller and not letting you count equity on any value in the land beyond the cash you put into it.

Also, listen to wurdan freo. He knows what he's talking about.

Jul 30, 14 12:25 pm  · 

I crunched some of those numbers yesterday and had sim. thoughts as Pale Shelter. Please point me to market where one can build for $123PSF and rent for $3.50PSF+!

Jul 30, 14 3:56 pm  · 
wurdan freo

I'm currently in the Denver area and these numbers are a high level estimate to see if a project is worth following through on. If it pencils out then its worth more homework. That homework may tell me that it's not worth pursuing further or that it's worth more homework. Since developing these numbers,my exit strategy has changed because of the info I found out from doing my homework. 

Cap rate, like all other aspects of real estate, is entirely dependent on the market you are working in. I couldn't ever imagine someone in their right mind buying a 6 cap,  but after doing some preliminary analysis, class A properties in the market I'm analyzing sell as low as a 4 cap.  So in my opinion, 6 was being slightly conservative. For me it was about being careful, not greedy. 

The rent price is high because I was analyzing vacation rentals. They pull an extremely high premium, but are seasonal.  The seasonal factor is hard to account for, but I've ditched that idea so I'm not worried about it. 

Build costs are gold for a developer. The best way to get them is to have accurate documents and put them out to bid. (This is where architects can have an upper hand. A developer usually has to pay to get the documents completed. An architect trying to become a developer will simply have to commit his time.)The numbers I've used are based on very schematic drawings that have been reviewed by a few contractors. Again, I'm not pursuing this project, so I'm not taking the numbers any further.

My original thought was to sell as condos, but too risky in this market for the reward at the current time for me. 

I plan on acting as developer and construction manager. Since I am new in town, I will probably hire a GC who already has an established network of subs. Then I can start to get to know them and hire them directly if I want for a second project, cutting out the middle man. I also plan to explore self performing some work. My wife enjoys cabinetry and I am a sucker for a CNC machine. But there again, DIY is not the best business model... so we'll see.

Phew!  Hope that sheds a little light on the numbers. I learned the hard way a long time ago that the numbers are worthless if they are not accurate. If you do anything, make sure you have accurate numbers. Don't guess. Don't assume square footage costs will cover it. Don't assume if you take my numbers above and plug them into your spreadsheet that you ahve anywhere near an accurate depiction. Get bids and analyze them. 

A seasoned developer who has worked for cushman wakefield, CBRE and now has his own brokerage in Vail told me that if he was going to develop it would be a no brainer. Go to the 10 largest markets in the US and start there. He said that for development to make sense there needs to be growth and those areas will be the easiest place to find that. He did not have good things to say about the rust belt and other places where growth has stagnated. Again, this is simple common sense. He wasn't too keen on Denver either, but recognized that there was significant growth projected here for the next 30 years. Not saying you can't develop anywhere, but some places it will be easier to succeed. 

Jul 31, 14 12:52 am  · 
won and done williams

My advise: look at some successful proformas. (As pointed out, the one above does not work.)

Also, I completely disagree that you have to look at the 10 top U.S. markets; that's macro urban economics. Developers don't deal in macro urban economics; economists do. Within any MSA from coast to coast, there will be a local "top 10 markets." The trick for the developer is to understand where the demand is within his or her market and how to meet it. (Something that architects quite frankly are not very good at.)

Jul 31, 14 10:46 am  · 
pale shelter

wurdan freo: thanks for the response! this is very informative and appreciated.

I'm in Minneapolis and have a good sense of our market; having built a few larger scale projects with some of the larger developers in town.  Living downtown 'in the market' also keeps me in the loop; i'd say 90% of the 75 architects I know do not live downtown or near downtown because it's obviously more expensive than the lame suburban experience.

We had a 2% vacancy rate last year but a huge upswing of 4000 new units is coming in.. looking at 4%...but our neighborhoods are getting more popular and we're now top 5 in the country for 'urban gentrification' - perhaps not the best term the paper used... but our downtown is finally rapidly growing again (upper class moving back downtown from suburbs - all ages - to live and work and be around our growing amenities)...and we're getting city investment with more light rail, city bike and car share are also growing rapidly popular. Our most popular neighborhood now is I'd say about 10 years behind the Pearl District character of Portland ... so I foresee continued growth for a while. Our city is also hoping to increase our downtown population by 35,000 by 2025. Just this week, the city proposed allowing for 'granny flats' in the city neighborhoods.

I'm quite confident in developing more fringe, smaller scale 6-12 unit townhomes or even vertical 3-story townhomes on narrow lots (something very popular in california..not at all here). EVERYTHING here is 200-300 unit scale large 'luxury' market rate developments... I live in one of those. Nice amenity packages but in my opinion, these are 'short term' rentals for people age 25-45 making $150k+ household income. In other words, the market here is either NEW BIG hotel experience .. or OLD duplex rentals in our nice neighborhoods bordering downtown.  I want to fit myself in between there and make a project better scaled on tight urban sights .. for high rental rates or condos.

It is unreal to me how much money is around... working as an architect - obviously we don't have any... so I"m probably the poorest in my apartment building lol ... So meeting people in my building who are in sales...pulling in $200k+ .. spending $2400/month in rent is nothing - even if it's only 900SF !! They want the urban experience ... but they are also looking for the right condos. ((i believe condos will make a comeback here soon as rent is reaching a tipping point)). THE tricky thing is - these 'luxury' rentals are designed nearly equal to the condos worth $300-$450k. Same experience and quality. So why buy?! ((here is where architect value is needed))

I would like to develop a pro forma here in the near term... hopefully you'll keep checking in here as I'd be grateful for your input. Best -

Jul 31, 14 11:15 am  · 

pale shelter, the 3 story narrow townhouse is popular here in Denver. My old firm did a number of them. Many have rooftop decks too. I make fun of them because they are basically stairs, but you can't deny that they are popular and deliver the urban experience people are craving. There are 34,000 apartment units under construction or in planning right now in Denver. Reference - Denver Biz journal article. Sounds like a LOT to me. 

Jul 31, 14 11:49 am  · 
pale shelter

Tint: Denver was on this report of urban gentrification...Portland, Minneapolis, Seattle and Denver lead the country from 2008-2012 or so in greatest change in urban mean income increase. We know cities are getting more popular in these "2nd tier" cities... but we're now finally seeing the major investments and huge numbers of new construction...34k units planned over next few years??! Holy s#$. I know we were around $2B in multi-family housing construction over last couple years. After 10 years of zero "high rise" luxury condos; we're now building 4 of them. And I'm not skeptical of this trend ... many believe we're already over the 'peak'. I'd agree, it will shallow out, but urban growth will continue. In 20 years, Denver and Minneapolis will have even better urban cores and cultural experiences.. just think; we're a generation behind great cities like San Francisco or Boston.. so we have a lot of growing to do. I'm very optimistic with our generation. And rather be an architect working for a client, sitting behind a computer, drafting .. i want to be in the drivers seat making great projects as a developer/architect in these growing communities... lol I want to beat the competition too ! lol

Jul 31, 14 12:11 pm  · 

pale shelter, I worked on a project that is also common here that you might be interested in, take a 70's era plain shoebox apartment building, the kind with a 1/2 story sunken garden level plus 2 levels above it and turn it into hipster condos. Some of the new units use two old apartments on different levels and have stairs in them. I did one of these projects where the contractor was a 20-something, he was also the developer and we (the architects, also 20-somethings) did it fast and easy and made it hip and desirable for the same age group and he did very well with it. Made it look easy. It was easy for us too. The units were around 900-1200 s.f. and sold for $235k-$280 each. That was in 2007. I just looked up that project, they are now selling for $290k-$313k. 

Jul 31, 14 12:53 pm  · 

Here's a simple proforma done at the feasibility stage in 2010 for an urban project that was built and leased up in 2012 (so, post-downturn). Note that the development profit number is showing negative because the NOI (5.1%) penciled out lower than the valuation cap rate at sale. Also, the equity for this project was high because of 60/40 LTV requirements a few years ago. Financing is easier now, but this project possibly wouldn't pencil because of the lower NOI and high equity requirements. However, the project leased up in 4 months at $2.32/sf average net, so it substantially outperformed the conservative proforma assumptions for NOI and had an actual Overall Return of closer to 7.5%. The building is a wood-frame 4-story apartment.

No. Units = 47 DU (avg 640sf gross each)
GSF = 30,000 sf
Land Cost = $940,000
Land Carry = 7.0% over 12 months --> Total Land Cost per DU = $23,500
Construction Hard Cost = $175.20 / sf ---> $111,830/DU ---> $5,256,000 gross
Soft Costs = 14%
Developer Overhead = 5%
Contingency = 5%
Construction Interest = 6.5% over 12 months ---> $145,662 with average draw of 65%

Total Project Cost before Operating Reserve = $7,741,794  ($164,719 / DU)

12 month lease-up with 50% avg. occupancy = $125,136 first year operating reserve

Total Project Cost = $7,866,930 ($167,381 / DU)

Maximum Debt at 7% Cap Rate with 60% LTV = $3,447,619

Equity = $4,419,311 (note: this is not all cash because of land seller subordination and fee offsets, but is treated as cash for simple proforma calculation)

Monthly Gross Rent = $1.90/sf
NOI (Gross Rent less Expenses) = $1.27/sf
Annual NOI at 5% vacancy rate = $402,222
Annual Debt Service = $275,245
Before Tax Cash Flow = $126,977

Overall Return (NOI/Project Cost) = 5.1%
Cash on Cash Return = 3%

Cap rate at sale = 6.5%
Capitalized Value = $6,188,034

Development Profit = -$1,678,896

Jul 31, 14 1:26 pm  · 

For those stating out there are many websites offering Performa templates (some free) and software. The main thing in creating a Performa is not to forget anything, just like doing a construction estimate. These sites offer complete lists of the categories needed to be addressed and answered.

As for the answers/ratios/balance ULI Case Study’s are a good resource. Banks sometimes hold Performa’s up to others to see if they match-up to something else that has performed. Yours does not need to match exactly but having a consistent format will help. I also used these case studies as templates for creating my cover summary of projects.

We have not gone here yet but the Performa is only one component to your package. I learned early at the start that I was giving banks too much information thinking that I would wow them with data, studies and reference material, to impress them with my knowledge & ability….found that it produced too many questions and doubt in some cases. Maybe others could contribute a sample “Contents” outline to help guide in this regard.

Jul 31, 14 1:59 pm  · 

I always do a very simple set of calculations, which I spread over four or five sheets of paper by category without much detail so there's lots of white space and it doesn't look complex. And then a feasibility study, which includes due diligence and conceptual planning diagrams (and sometimes a market study). And finally, a brief summary of who the players are and what their participation and experience is, with some project portfolio stuff as relevant. That's it. Works every time. Banks like it simple and easy to understand.

Jul 31, 14 2:14 pm  · 


can you provide me with some sample/template pro formas?


and what are these ULI's case studies are you referring to?



I am just starting to learn and still have trouble grasping the vocabs and what these numbers mean in pro forma sheets. what was a good source for some of you to really get this stuff down?

Jul 31, 14 3:20 pm  · 
pale shelter

batman: just google 'pro forma multi-family housing'... 'pro forma townhouse', etc. I have found numerous examples over the past weeks I've begun research..many complex ones..and often for large scale development. I've also searched 'architect developer' and have read a few thesis papers from grad students getting double-major in real estate + architecture. Also; get yourself a free or cheap subscription ($7/month?) to SCRIBD .. there are ULI books on there that would normally cost $200...  in addition buy books by some of the harvard real estate professors, MIT, etc. William Poorvu (?) from harvard has a few books ... just read read read.... it's all FREE or cheap to find...  no need for us to ask these gentleman to do the work for you, their comments on this forum are great help as is...Finally, I have found a few template EXCEL files for pro formas by googling as well. Good luck- i'm in the phase of research / studying...networking a bit...hopefully get my first project with a partner or somehow find investors perhaps next year...?...

Jul 31, 14 3:48 pm  · 

Batman, Sure,

Performa Templates – Just Google “Real Estate Performa Template” and its all there. An example is I have not tested it but it’s a sample to look at.

ULI - (Urban Land Institute) Go to Publications then Case Studies. Good resources for professionals and students alike. Good for resume. Little pricy to join but I think that you can just subscribe to the case studies…..isn’t clear how, try and ask.

Jul 31, 14 4:06 pm  · 

Batman, Just learned that a 1 year subscription to case studies is $249/Yr.for non-members.

Also, as you look at templates and Performas just Google terms you don’t understand.

Jul 31, 14 4:16 pm  · 
pale shelter

Carrera; others: How would you suggest the most efficient+effective way of approaching a land owner? Let's say I see 'an opportunity' on empty property and have done a quick feasibility study and back-of-envelope analysis.... Do you call and just see if there would be any interest?...take them out for lunch with a sketch and pro forma?.. how far do you go before you approach anyone? thanks

Jul 31, 14 4:35 pm  · 

Call them up and ask if they've considered selling. You might be surprised. A lot of property owners think about selling for a long time before they actually list. Having someone ask can often be a trigger for making a decision.

I generally will not show my development plans. That's proprietary info and the key to what I think the value of the property is.

As for the negotiation, try to get a transferable option to purchase for a small sum. That gives you control of the property without a major cash commitment and is always the best way in. Many sellers are wary of this, though, and may not go for it. They'll demand either a high option fee or refuse outright. Failing that, and if you can't reach a price that you like, I've often found it can be useful to say something like, "I tell you what: I'll meet your price if you can work with me on terms." Even if their price is high, that can often work very much to your advantage. For instance, I bought a property a few years ago which the seller refused to part with for less than a price he had his heart set on, but which was about 50% above market. He'd been beat up by several prospective buyers on his price and refused to budge, killing all those deals. I sidestepped the issue by saying I would agree to his price with no argument if he would take back paper on the deal (seller-finance) at my payment terms, and give me lien subordination in the bargain. He agreed to that, and I wound up getting the property for less cash up front than if I'd beaten him down to a more reasonable price and conventionally financed it.

The key thing is to get legal control of the property with minimal cash outlay. Options are best for that, but other arrangements can work out well too. The seller doesn't need to know what you plan to do with the property, so don't tell them unless there's a very compelling reason you need to. Your concept and your pro forma are your business, not theirs.

Jul 31, 14 5:28 pm  · 

Pale shelter, Look back at my Jul 27, 14 12:46 pm post for one of my examples. Gwharton and I have suggested two different and attractive tracks. One seeks to bring the land/property owner in as a partner and the other (Subordination) seeks to just gain control over the property and proceed on your own. Both are good strategies but going-in with both may be the better.

Your question was how much should I do before I make the call? Opinions may vary, and with experience. First, before doing anything you need to research the property, learn about its history & zoning. Then research the owner and learn what you can about who you will be talking to. Not an FBI investigation, just internet stuff….where does he live, what other properties does he own, what does he do for a living, that sort of stuff. Then search to see if he has a mortgage on the property and if so how much. If you find that he is a developer or has a $200k mortgage on a property that is valued at $200k it obviously won’t work so you look elsewhere with these schemes.

If the light is green then I would create a site plan drawing to get the quantities needed to estimate the improvement cost. Then I’d run some numbers to seek feasibility of my idea. You don’t need to slave over these things but more than a back-of-envelop. If the light is still green (sometimes I’d go on yellow), you then make the call. As to the call, it isn’t “…call and just see if there would be any interest”, the call needs to be crafted at first, give it a lot of thought, rehears it in your head, jot down some notes. Over time mine was just “(introduce myself) I have been interested in your property on Oak Street for some time and would like to meet with you to present some ideas I have to help you get it liquidated. Would Tuesday at 10 be good for you?” He may dig a little and want more and if he does just explain that you have discovered different alternatives that he should want to explore.

Taking the site plan along is harmless, its needed talking paper. What to do/say at the meeting is simply a function of learning about both paths then teach it to him at the meeting. Choose one first that you think is the preferred fit and if fails, switch to the other. I haven’t commented on subordination because it never worked for me. It’s done all the time, more than partnering, and I understand it perfectly, but it just didn’t work for me. Owners (mostly inexperienced people) always felt they were giving up the property somehow and would lose control. Partnering made them feel more involved and in control somehow.

If he is agreeable to explore then you crank things further and drive down the path of least resistance.

Jul 31, 14 8:04 pm  · 

Development has been discussed so far and I hope it continues, but also what about architects adding construction management to their services? Maybe starting out with small commercial projects were small contractors may be hard to find, or garner bids from.

Aug 2, 14 12:15 pm  · 

im actually doing a m.arch + here at columbia.



ive been doing a lot case studies from Harvard's Business school. they offer a lot of good case studies so you can get a good handle on various aspects of development/real estate.


still learning!

Aug 2, 14 6:20 pm  · 

luckily my school pays for my ULI membership so ill definitely check out the resources they offer

Aug 2, 14 7:16 pm  · 

I picked up elsewhere “I don't have employees but that is because there isn't enough work at this time so I have to sort of figure out that. How to compete with some of these design-builders. Those are my challenges.” One of the reasons I pursued being an architect-contractor-developer at the start was to address this situation. I am hoping this thread could discuss this and offer ideas and insight as to how to grow despite the pressure of the design-builder.

Aug 4, 14 1:29 pm  · 
pale shelter

Carerra: I feel the same way - and we're seeing in my city very large contractor companies (doing construction in the billions) soak up more architects and continue to get larger. They are forming corporate developer+contractor+design services .. this is nothing new; but it's the Wal-Mart / Big Box era continuing.. and I'd like to see the pendulum sway the other way and see architects getting into development.

I've been meeting with local developers to hopefully get in that 'arena' and business and make the career transition... for various reasons (to get out of the traditional architect role and traditional office). I was excited and positively shocked when a developer asked me to write down a list of Career Goals that I have in addition to my resume. In all the architecture firms I've interviewed and worked for, I've never been approached in this manner.  I've become quite estranged to my industry.. all the obvious traits: poor business practices, poor pay, static growth and career advancement,  business is for republicans and developers...etc... AND .. lack of entrpreneurialism. Granted, this is just my perspective... but for those wanting more in a career and to be perhaps a bit more 'competitive' with their skills, I'm thrilled to make this transition (hopefully asap) into a developer+architect role... and be an INSTIGATOR vs.  a cog in the wheel sitting behind a computer doing drawings all day.

* Just listening to national radio today ... a European economist mentioned how although US colleges are highly esteemed, as a whole we do not teach how to work for ourselves / be entrepreneurial. Rather, we learn to work for others.  (Perhaps why we have so many giant corporations ??)... In terms of Architect education, this couldn't be more true... architects are some of the least business-oriented professionals in relation to the parties with do business with. This frustrates me to no end... AND: is the main reason I have found difficulty in proving to a Developer company that I have skills beyond 'being a designer'.

Aug 4, 14 2:24 pm  · 

Pale shelter, Starting out I worked for many architectural firms but as time progressed I got a PM position and quickly learned in dealing with contractors and guys-in-the-trailer that they thought we were a joke and told many times that “architects don’t know anything about construction”. This infuriated me! But I started to think there was something there and decided that in no way was anybody going to say that to me again and I made the move to a Contractor+Developer with my drawing skills to learn everything about what they did, how to do it. I didn’t start out to be an architect-builder but just to learn the process and come back.

All of the negative traits about business and entrepreurialism etc. you list about architects are true for many and it is true also that so many things needed are absent from school. It is essensal to supplement these things starting out in school and seek them out constantly along the way. Look at I discovered it this morning. It’s full of discussion, ideas and learning experiences for architects on these supplemental needs. This guy is a champion of business and entrepreurialism in architecture.

I’m glad you’re making the slide that’s what this thread is about. I made the slide using my design/drawing skills but also consider your plan-reading skills. Many developers build their own stuff and need estimators and PM’s. Consider what I wrote elsewhere on this subject:

“It’s easier to teach a student of Architecture to be a construction manager than the other way around.” This applies to employment too. I once taught a night class entitled “How to Read Blueprints”…full of aspiring trade guys trying to learn to read prints and move-up to superintendent….I couldn’t believe the retardation. I don’t know if it’s just in our DNA or what but just having this skill is enough to start. If you can read a print, you can do a take-off and that’s the runway to becoming a PM. PM’s “Carry the Mantel” on projects and from there you can go anywhere on the GC/CM side. People coming from architecture are infinitely more qualified to tear thru drawings looking things up, referencing back-and-forth. Missing something on a drawing or spec rings the Death Nell at these places.

Good luck and regards.

Aug 5, 14 2:16 pm  · 

Lets remember that many of architecture students are decent high school students. When it comes to trades people, it runs a wider gamut. There are smart and intelligent trades people that have stronger academic skills. There is a contingent of trades people and construction laborers who were drop outs in high school and C- students in a low quality school district with a low quality middle school where you can probably pass the class if you attended all the classes but did Ds or Fs on exams and Ds on class-work. 

There are some people who learns more better by doing and by hand kind of work then mental thinking jobs. They aren't usually the licensed contractor. Some people can't really elevate in mental thinking type work because they mostly work by hand. Tell them to nail the nails in marked locations and they'll do it fantastically. This only represents a segment of the construction field. Then again most of the construction job positions don't require advance thinking. 

Most of the people with the good academic skills don't work in the construction as laborers (for long). Most will move up quickly, or become contractors, or go to architecture or engineering school or something else. 

There is a lot of laborers that apply that have disabilities that essentially bars them from getting certain jobs because the employers just aren't going to hire them, or they are wasted by alcohol and/or drugs, and there are people who doesn't learn well by reading but by doing things by hand. It isn't unusual for many of the laborers in construction field that has criminal record backgrounds because they get on parole and need jobs so they get called on to these laborer jobs and eventually stay on-board after parole period ends. Alot of times, the juvenil hall and jail time rap causes them to not have developed the academic skills they need to move up in work jobs that requires certain skills attained through basic academic skills. They lack it and need to gain the skills. This statement is not to imply a complete representation and there is a lot of individual circumstances.

I've seen alot of these folks. They are good guys, usually. They just don't always have good 'academic skills' and that is one area they need to develop before they train for construction management / project management.

I wouldn't say if its DNA entirely because DNA is not the sole-indicator of a person's destiny. They often grow up in broken and dysfunctional families and so forth.

Aug 5, 14 4:10 pm  · 

pale shelter mentioned that there are "large contractor companies (doing construction in the billions) soak up more architects and continue to get larger. They are forming corporate developer+contractor+design services..."

I'm still in the beginning stages of my architecture career and would like to learn more about development. IMO the traditional architecture model is not sustainable and therefore would like to get into a company that is an owner + contractor + developer + property manager, etc... 

Architects, developers, and GCs are relatively easy to find through a search engine, however I'm having a hard time finding companies like the ones mentioned. Any tips on how to Google for them, which publications to look into, what websites to visit, etc??

Aug 5, 14 5:55 pm  · 

ark1t3kt, trust pale shelter will add some too but if just general interest look at Glimcher in Columbus, Ohio as an example, trade organizations like NAIOP , magazines like Engineering News Record and of course ULI (Urban Land Institute) is always a good resource. If you have a specific geographic to offer I can help locate some closer to you.

Aug 5, 14 7:16 pm  · 

Carrera, thanks for the reply and the info. I will check out those resources. I was more interested in the Chicago or Atlanta metro areas.

Aug 5, 14 10:21 pm  · 

ark1t3kt, I started looking at those cities and discovered that so many big development firms hire out all the disciplines. They have architects on staff to manage the process and do programming but no grunt level to start. You are right developers are hard to locate mostly the medium and small. That is because they are not selling anything and do perform most all in-house. The best way perhaps if you live in one of those cities is to drive around and search for projects underway and investigate from there.


Aug 13, 14 4:26 pm  · 

Carrera, thanks for the response. I would like to ask you a couple more questions, but don't want to clutter up this thread. How can I send you a PM? You must have that feature disabled... thank you!!! 

Aug 13, 14 5:04 pm  · 

ark1t3kt, sure, email to

Aug 13, 14 6:38 pm  · 
Bump ^^
Aug 18, 14 8:55 pm  · 
pale shelter

Small scale developers are hard to locate; and part of that is because they're most likely not doing the noteworthy, high-design projects.

I just accepted a position yesterday to join a developer who runs his own dev company, land acquisition, construction and mgmt company. It's basically him running the show. He has 85 employees in the construction division. An architect friend referred me; as his firm is working on a 200 unit mixed-use building of his.

I will admit how scared I am to begin this new 'transition'.  Although I'm 99% sure I want to become my own architect/developer, and that this is the best way to learn quickly (and the benefit of not being in a corporation but just working along side this guy) ... the whole work environment and people type is striking. It makes me a bit uncomfortable. *We are indeed lucky to work in great office environments at architecture firms, and in great downtown, walkable locations.. with interesting, smart, dynamic people. To what I'm about to confront; is perhaps the exact opposite...(disregarding intelligence).  I will be reverse commuting from my great downtown apartment 20 miles to the suburbs... have an office with no window at a very very suburban building...surrounded by cars, frontage roads and strip malls.

They say the instant you get comfortable, then you're giving something up. For anyone transitioning into this development career like myself; be aware of this lifestyle change. It may be a good idea to consider a mid-size company doing nice urban projects. But I'm finding that it's hard to come in as an architect, and be pigeonholed into a certain area of expertise in a dev company. My position will be learning everything from the finance, marketing, construction mgmt, sales and consulting for land-rich owners who want us to build/construct/manage a building for them. This is probably the best way to learn ... so good luck finding these single business owners...

Hopefully after a few years the knowledge gained and new network will put me (we architects) where I/we want to be eventually... in more control of design.. and Owners of great projects.

Aug 20, 14 2:07 pm  · 

Whoa pale shelter congratulations!!

You are right about environment I used to describe the difference to my students as - hanging macramé vs. fake plants; Knoll furniture vs. steel USAF surplus; NPR piped-in vs. nothing and small-cars vs. big cars. Just remember that you are there to learn and that their sole purpose is driven by money but they will learn from you too, maybe the boss will let you bring in a macramé.

With 40% of work going Design-Build you all need to reach for opportunities to take-back control and congratulations to you PS for taking this step. Even if you do not get a brass-ring you’ll be a better architect for it and be tremendously more marketable.

Aug 20, 14 4:37 pm  · 
pale shelter

Thanks Carrera..appreciate it. You're 100% correct; 'there to learn'... that's how I'm taking it. It may be a 2-3 year experience, perhaps longer, who knows. It will take a lot of getting used to the environment though lol... yes; cheap surplus furniture in a suburban office building overlooking a parking lot...and yes lol big cars and khakis and polos. and a car commute..ughh

Talking with my architect colleagues and bosses today when I game my notice; I still find it fascinating how even the word developer brings up such a bad taste in their mouths... "all they care about is money"..."don't understand the value of design".. etc. I agree that this is often the case, but not always. Just yesterday our urban design team sat around talking about "how can we better appeal to potential clients in winning jobs... beyond just lowering our fee?"... "We need to explain our value better"...etc.

Well, like Jonathan Segal (architect/developer) says: "why don't we architects realize that value for ourselves". It's like putting your money where your mouth is. Why can't architects get in the business of owning and developing their own projects? That would be a good way to improve our building stock I think.   Cheers-

Aug 20, 14 5:48 pm  · 

That is a great idea that Architects could become a great contractor or developers. This is one great combo because it would make things so smooth for any person to build his house of office. Moreover, I have heard about some of the companies in Toronto where a group of architects formed a great team and founded a company called fortress real development.

The company has certainly made a remarkable name and reputation in the industry. Therefore, I completely like this idea. A lot of people or companies tend to hire a construction company and an architect separately for building homes / offices. It would be lot much convenient and easier for people to approach a single person who can do this job with complete ownership.

Aug 22, 14 4:44 pm  · 

As a building designer, even I am looking at the design-CM/PM/build model. As for becoming the developer as well... maybe the next step. Financial ducks in row needs to be in place.

I have to have enough equity value to get the lending and investment capital to kickstart on that end.

Aug 22, 14 5:37 pm  · 

I haven't been working in architecture for 5 years now, but when you aren't working in the industry things happen like you meet people that want to build but don't know how to get started... so they've asked me to help. I know some things, but not all, going to try to help them.

They want to build a "tiny house" subdivision. Anyone done one of these or seen one?

Aug 22, 14 5:43 pm  · 

I've seen as well as read about them. However, I haven't particular had to do one of those kinds of projects.

I've even taken a course recently on minimal dwellings.

As for building a sub-division of tiny houses...... okay. What state would this project be located? I could very well look into doing such a project provided I am not violating licensing laws of a particular state. I don't want to do that inadvertantly.

Aug 22, 14 6:05 pm  · 

Richard, we are in Colorado. 

Aug 22, 14 6:31 pm  · 

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