Episode 8: Untangling Layers And Layers Of Real Estate Development
In real estate development, as in life, the only constant is change. There are *so* many challenging and confusing layers of what rules apply and to where. Nearly all of the rules in real estate development are very geographic dependent, and ALL of them come with many MANY layers of rules that can be very confusing. In this *very technical* episode, we explore the layers of real estate development. From the federal level, all the way to your neighborhood, you need to understand how to figure out the rules and what applies to you! And then, of course, as soon as you figure them out, they will likely change very soon after. This episode is all about how to approach real estate development from a very zoomed out level all the way to your particular parcel!
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Full Episode Transcription
Welcome to My Life as a Landlord, where we untangle all things housing and educate the curious. If
you're looking for some entertainment with some honest, awkward conversations, you've come to the
right show. I'm your host, Dr. Jennifer Salisbury. This is my life as a landlord. Welcome to it. 1s Well,
hello. Welcome to the show. I'm Dr. Jen, your host. This week's episode of My Life as a Landlord is all
about untangling layers of real estate development. I know many people, when they think of real estate
development, they think of lots of headaches, heartaches. You might think of some of those shows on TV
where they do fix and flips in seven days. 1s And I must tell you, that's not reality every day. In fact,
that's not reality most days in real estate development life. And so this episode is all about untangling
some of the headaches and preparing. As a real estate developer. How do you actually avoid some of
these heartaches? Before you even start that's this week's episode, there's a lot that's okay a. Now, I must
tell you, we are not fix and flip people. Mike and I are fix and hold people. We usually have multifamily
units. We don't usually look at anything less than four units. In fact, now we are not looking at anything
under 20, and we're going to be getting into bigger properties. 1s Pretty soon that's really where we want
to go is creating communities in some of these bigger communities, bigger properties, and looking for the
right development area. You've got to really prepare on the layers for 1s these properties. And I'm going
to go into that here pretty quick here. Now, just a reminder that when you are developing real estate, you
will always be searching for the highest and best use. Highest and best use is an industry term that means
for a particular parcel or property, what is the biggest and best way that can be maximized on that
property. So if you're in downtown New York City where everything is a 50 story or more high rise and
you want to put up a gas station, that's probably not going to be considered highest and best use. In fact, I
can't even think of a gas station in Manhattan. If you know of one, make sure you tell me in the
comments because I don't know of one. But if you're in somewhere in the south, let's say Alabama, in an
unincorporated rural area, and there's one farm or one single family home for every five acres or every 50
acres maybe that is considered highest and best use. Very geographic dependent. And that is where the
layers of rules come in. And this is what we're going to be talking about today. So if you can imagine a
map of your parcel, just one, maybe it's the home that you live in, maybe it's the parcel that you're
looking at or working on, or maybe you're in due diligence, but you zoom in all the way there. Believe it
or not, that is not the only thing that is governing, just the bounds, just the borders of that physical
property. You have lots and lots of overlaying issues with that parcel. So if you start zooming out and
zooming out and zooming out, actually go to a national level, go to a federal level, whether you're in
Canada, whether you're in the US, whether you're in the UK or Australia, wherever you are listening to
this podcast, think big. Because you're going to have to know that on the federal level, there are rules.
There are laws that are going to govern your property and you need to learn about them a little bit before
you get into development. And most of the time, federal rules have to do with water. They have to do
with in the US, it's about abilities. The Fair Housing and American Disabilities Act. Highways.
Highways can be federal. In Canada, you've got the Canadian streams, you've got water. But that can also
be provincial. So you've got to learn a little bit more about that. But when we're talking federal, there is
big overarching layers, especially if you're on a bordering state like, say, California. 1s That is coastal,
the coastlines. A lot of them are affected by federal law, federal rule. What if you're in British Columbia
and you want to put in a dock or your property has a dock? That is very likely federal. See how this can
be very geographic dependent? So let's zoom in just a little bit more. So we talked about federal, but what
about state and provincial? There are federal programs a state, and I'm talking specifically in the US. Can
zoom in on, and that is specifically coastal zone management, meaning the environmental impacts to the
coasts. And that affects anywhere that there's a coastline, whether it's Oregon or Florida or Hawaii,
Alaska. If the state buys into this coastal zone management, then they must fully buy into it. It's not just
something that they can do willy nilly. It's either you're doing it or you're not. Being in Hawaii at the
moment, hawaii absolutely does coastal zone management, and they have to fully execute it, which is
pretty incredible. So even though it's a federal program, it's state enforced. And we'll get into that even
more too. You also have land and natural resources. You might have Department of Fisheries, some of
this stuff that's state, provincial agriculture, land reserves. These are parcels that are specifically designed
for agriculture use. And that's very North American. I know there's other verbiage elsewhere in the world
where they have something similar that it has to be used for agriculture. But this also goes into what if
you have a creek or a stream, you have a riparian area. Riparian area is a certain set of distance away
from a creek that you can't build. That can be either state, it can be provincial, but it also can float back
up to federal. So I know I'm talking federal and state almost interchangeably at the moment. Welcome to
real estate development. It's going to be so detail oriented that 2s you've got to learn some of these layers.
But you also need to learn who to ask these questions to. And I'll talk about that here in a minute. Let me
just keep zoning in. So we were talking about federal, we're talking about state and provincial. Let's
zoom in even more. Let's talk about your county or your city and specifically talk about whether you're
inside the city limits or you're outside the city limits. If you're inside the city limits, very likely there is
also another city set of bylaws, whether it's zoning bylaws or community plans or economic zones, there
is some other layer that will affect your parcel if it's in a city, if it's in the regional district or in the
county, but not in the city. 1s See how this works is that you've got now, it doesn't affect the city stuff,
doesn't affect your parcel if it's outside. But the federal and the state or provincial stuff still affects. It
very geographic dependent. You got to be very careful on how you do this. Now, how do you learn more
about this? How do you learn what's what? Federal, state, provincial? You've got to go wherever your
parcel is, if it's in the city, you've got to go to the city. You got to go to the city planning office. You got
to walk right in and go. I need to understand how my parcel is affected by all of this. And the thing is,
they will know. They can look up on the city folks, can look up on the tax records most likely, and see,
oh, you're in a riparian area. You've got a creek right next to you. That means you're affected to this. You
need to either call these people or talk to them. Maybe you need to talk to an environmental engineer or 2s
you're outside the city. You're in the regional district, you're in the county area. So you need to talk to
someone at the county. Maybe the county doesn't have. 1s Building permit requirements. Maybe all you
need is a sign off from the health inspector, right? Maybe you need if you want to put in a well and a
septic, you don't need to talk about building, you just need to talk to health. That is something that can
happen in many different places. Again, this is so geographic specific dependent on where your parcel is.
But you've got to learn who to ask and what's the question to ask. So if you figure out who to ask,
whether it's your city person, your county person, you can even call people at the state, and I've done
that, call the state health department and say, I don't understand what this is all about. Can you explain
more? And they will, and they might use jargon. I highly recommend if you're going to call the state or
the city, take notes. I even take notes when I go into their office, which is, I know a little bit unnerving,
but I'm learning. I don't know all this stuff, I'm still learning. But that's the only way to untangle it is to
learn more about whatever parcel that you're either trying to develop or that maybe you're looking to
make an offer on this parcel or you've got a customer who owns the parcel and you're trying to figure out
how they can build a house and a barn or whatever else they can do. But that's the key here is what's the
right question and who's the right person to ask? And the worst part about real estate development is even
when you have all of your questions answered, then the rules can change. The rules can change and that's
incredibly frustrating. But welcome to the real estate development. So I want to call to action to you.
Normally I do a list of three things in my podcast. I normally will say zero 1.2.3, but I really wanted to do
an overarching podcast about real estate development that sort of sets you up for when you want to
develop something. How do you actually prepare? And the biggest thing is you've got to research what
impacts your parcel and how do you learn about it. But you've got to educate yourself. And that's what
this podcast is all about. When you're trying to get to the highest and best use of the parcel that you've
got, what are the layers that you've got to get through? And how do you even figure that out? How do
you ask that question? So talk federal, state, they're all people that work in these offices. I guarantee it.
Wherever you are, you can call the phone number and say, this is me, I live in this city or I live in this
rural district. It I'm trying to build a barn or a house. I need to know what steps I need to do. And they
will guide you and they can at least lead you to the next person. 1s If there's something that I've said in
this lesson that's intrigued you, I highly encourage you that you research it more. You've got to
understand the rules in real estate development. If you don't know what the rules are, if you don't know
how when you request for a building permit or you request for a health inspection, if you don't know
what the rules of the game are, how on earth are you going to develop a piece of real estate properly and
safely and really get it to Occupancy? That's the whole idea. So make sure you want to take action. If
you're a real estate developer, you want to get into real estate development, I highly encourage that you
listen to my next podcast, which is all about credit on why credit is important, your personal credit, but
also your business credit if you knew there was such a thing. But as a real estate developer, someone who
wants to get into real estate development, you have got to know the rules. And the best way to do that is
untangling the layers, the many layers of real estate development in advance for the area that you live in.
Thank you for joining us this week. To view the complete show notes and all the links mentioned in
today's episode, visit our website at www.mylifeasalandlord.com. If you're looking for educational
resources for getting into real estate investing, becoming a landlord, or even a better tenant, then I have a
page on my website to get you started looking for a solution to the pickle that you're in, I've suggestions
for that too. You can throw your situation on my Facebook group, My Life Is a Landlord and let our
community help you with solutions. Also, be you go make sure you subscribe to the podcast so you can
receive new episodes right when they're released. You can either subscribe right now in the app you're
listening to this podcast on, or you can sign up at www.MyLifeasalandlord.com thank you again
for joining me, Dr. Jennifer Salisbury in this episode of My Life as a Landlord. I'll see you next time.