Woodburn Residential Development Case Study

The Challenge

A 15 acre residential development parcel owned by eight adult children, who did would not allow any developer to encumber the property for entitlements, prior to conveyance. To determine feasibility of development, significant money would need to be spent. The developer would need to know that if he spent the money he would be allowed to purchase and develop the property.

Each of the eight siblings had different goals for their respective portion of the property.

The Strategy

The developer would buy 67% of the property for $12,000; the sellers would retain 33% of the property.

The developer would improve the whole property and provide a performance bond, insuring the property development.

The seller would have a 2nd trust deed with a reversion covenant if the developer did not complete the project within a given time frame.

The Results

The developer was able spend a nominal amount to purchase the land; was able to finance 100% of the construction financing, enhanced profitability by 50%, and did not have any direct costs until after the project was completed. This provided an outstanding result for the sellers as well. Each of the eight adult children received 3 finished lots, with minimal tax consequences, since the underlying real property had not been conveyed to the developer."