^ Really good overview of the land development process. Mr. Franklin always has great articles.
Land development is a complicated business. There are not very many land developers that go to investors looking for $10k investments. These are huge capital investments where the returns are made from the very, very long term hold.
When putting together the OPC (opinion of probable cost) to develop the land this is collaborated by several professional consultants and engineers so it is possible to have a fairly high probability of the cost to develop, for a given stage. Contracts of this size are administered and managed by tender and with the help of engineering consultants.
On the revenue side, banks are not oblivious to what market prices are. Most lenders will require 50%+ presales before providing the development funding.... (this is part of the reason why so many projects are "on hold" in Edmonton right now)
When you look at a large, neighborhood-sized land development (for a quarter, 160 acres), you are looking at a 10 - 12 year build-out. Margin on the first stage is probably going to be negative due to all of the off-site costs. There will most likely not be any cash to repay investors or anyone but the bank until the first couple stages are completed.
Land development is a very complicated business. Trying this on your own without experience will probably lead you to financial ruin. Great article!
