Development Milestones & Value Creation

New home development happens in phases. Milestones are met and the value of the project grows. In steps.

When clients get in-touch with us at HUTS, it's often after their previous routes to getting a home fell flat. Existing inventory was no good or overpriced. New tract home houses were too big or lacked taste. Working from a blank page with a custom architect was too expensive, came with too many unknowns, and didn't cover the required development tasks. People come to HUTS for a better, more streamlined way to design and develop their home.

We make a point of describing to our clients that buying a home and building a home are very different routes towards getting a house. Buying a home is transactional and binary. One day you didn't have a house. The next day, after closing, you did. Along with all of the carrying costs and all of the current value of the property. All at once.

Developing a piece of land doesn't work like that. At each phase and at each milestone, the goal is to create value. To have a property that - at that point in time - is worth more than your investment into it so far.

But, in all likelihood, you're not a land developer, right?

You just want a beautiful property that’s more valuable at the end than it was at the beginning. We know. We're here to help your home design and development project meet all the marks in the journey from raw land to finished home. Let's take a look at those steps, tracking a sample property from end-to-end. All figure are illustrative of the process, but

Raw Land

So, you're looking at raw land. Let's imagine it's a 10-acre parcel listed for $120k. That's the starting point for your home development project.

There are two ways to create value and one way to forfeit it right from the get-go.

Value Creators: (1) You can buy the property for less than it's worth. Great! (2) We can uncover in the due diligence and feasibility review that you'll likely be able to subdivide the property and break off, say, a 2.5 acre parcel that could be sold for $50k. That’s a bonus.

Value Sink: You could purchase a land parcel without having a handle on unexpectedly high groundwork costs. Maybe there are wetland issues or other ground conditions that will make building a septic system difficult. Maybe the topography is such that the earthwork, driveway and foundation costs are going to blow your budget.

Our land services, including land.nyc, concierge land sourcing and land evaluation are designed to uncover value and avoid sinkholes. Let’s say you bought the land for $100k, but it was really worth $120k. Well done, you (with some support from HUTS on due diligence and lot assessment) have kept you in the black.

• Capital Investment: $100k
• HUTS Services to-date: $4k
• Value Created: $120k
• Net Value: $16k

Approved

The next step is to get approvals for groundwork efforts. Driveways. Septic Systems. Wells. Electrical. Having a site plan that is approved by the various planning agencies - Board of Health, Planning, County or State Highways Departments - holds value. HUTS has worked with you to create a comprehensive site plan, organized the groundwork team, and got your septic and driveway approved. The lot’s getting closer to shovel-ready, and is now with worth $140,000. The value’s going up, and out of pocket costs are staying pretty low.

• Capital Investment: $100k
• HUTS Services to-date: $10k
• Value Created: $140k
• Net Value: $30k

Improved

Moving to an Improved Lot is a big leap forward. In this case, you’ve invested (likely out-of-pocket) to complete the groundwork projects to get your lot closer to shovel-ready. You've worked with HUTS to hire a tree service to selectively clear the build site. You've worked with HUTS to hire an excavator to build a driveway to your home site. We’ve engaged the excavator to execute the septic plan, had a well driller tap for water, and had an electrician set up a transformer near the home site. Depending on the lot’s condition and topographic difficulties, the costs in this step will vary, but let's say you spent $50k. It's reasonable to assume your improved lot is worth 2x - 2.5x per acre from it's raw land value. Conservatively, the property is now with $250k.

• Capital Investment: $150k
• HUTS Services to-date: $15k
• Value Created: $250k
• Net Value: $85k

Entitlement

The last big milestone before you begin construction is entitlement. Simply put, your lot is considered entitled when you have town- or county-approved and fully-permitted plans in place. After working with HUTS through the design process, our Studio team (in collaboration with our local consultants) will produce permit documentation and secure approvals for your land. Big deal. An improved and entitled lot? It's worth about 3x the raw land value. We’re now at around $300k in property value.

Let's Do Something!

• Do you have land and are ready to move forward with a home design and development project? We're ready to chat about it, in most parts of the country. Get Started HERE!
• You can't design and develop a home that's floating in space (yet). You're gonna need some land. Start with LAND. We've worked our asses off sourcing, documenting, researching and presenting the best buildable, affordable (150k and less) and beautiful lots within 4 hours of NYC.
• Have a smaller budget? Or, want a small cottage that can support a big life? Our ADUs are remarkable structures and no matter what you have in mind - guest cottage, rental unit, small home while you wait on construction, whatever - the construction cost vs. value on our ADU designs just make sense. Buy your plans HERE.

To date, you’ve spent $100k on the land acquisition, $50k on improvements, and +/- $30k on HUTS design and development services. In this (relatively typical) scenario, you're about $175k in the black. Awesome. HUTS has made up the value of our fees a few times over, and we’re really excited that you're growing and storing equity.

• Capital Investment: $150k
• HUTS Services to-date: $30k
• Value Created: $300k
• Net Value: $120k

Go or No-Go

Developers talk about go / no-go moments. It's that choice when you either cash-in on the value you've created by improving and entitling the lot, or decide to start drawing against the construction loan (and paying interest), to “go vertical” and build.

Of course, you started this whole thing to get a beautiful, HUTS-designed home. But, you have options. Because things can change.

In the end, let's say you build a HUTS home for, say, $550k build-cost on your lot. Our goal is always for a completed home to be worth 125% - 150% of construction cost, so ideally the built home is worth $750k after construction.

So, where'd you net-out on your investment, with HUTS design and development support?

Your land that you bought for $100k is worth $300k. The house you build for $550k is worth $750k.

The groundwork and other miscellaneous services you hired cost you $75k.

HUTS total design and development services set you back around $40k in total.

And we had a lot of fun along the way.

• Capital Investment: $700k (Largely financed)
• HUTS Services to-date: $45k
• Value Created: $1.05mm
• Net Value: $305k

Enjoy your Place

You spent or financed $700k to create an equity-positive asset worth around $1.05mm.

And, remember that subdivided lot? That's $50k cash in your pocket or we can work together to develop it and go through the same value creation exercise for this bonus lot.

And then there’s short-term rental potential, if that’s part of your picture. This house you built rents for $300 / night at 60% occupancy (or 219 nights / year) in a conservative market. That’s $65,700 of rental income to subsidize or turn a profit on your total carrying costs.

At HUTS, we love design, but we’re also your development partner. Let’s chat about how to make the math work on your project.