Jason R. Rubin is an entrepreneur, real estate investor and real estate attorney based in South Florida. He specializes in handling complex real estate matters and advises investors on strategies that help mitigate risk and maximize returns. In addition, Jason serves as Chief Development Officer for Richr, a real estate PropTech/FinTech startup dedicated to creating a more streamlined, equitable, and all-inclusive real estate buying and selling experience. Mr. Rubin holds a Bachelor’s Degree in Business Administration from The George Washington University and also holds a Juris Doctor Degree from Nova Southeastern University’s School of Law.
Climbing interest rates, soaring inflation, talks of a recession. These are not the news stories a developer — or property owner, for that matter, wants to read about or hear. Fortunately, however, it is not all doom and gloom. Global consultant Deloitte recently reported that “consumer spending remains positive as consumers continue to spend the massive savings they accumulated during the pandemic” and that employment figures are strong.
In the same report, Deloitte identified that the true test of how robust the economy is and how resilient it is to inflation is how prepared financial markets were (predominantly lenders) in factoring in margins for rate increases. If they were cautious and factored in enough fat, then the financial markets will weather the impending economic storm and things will ultimately stabilize. If they were not cautious enough, then the financial market is set for stress and this will create a knock-on effect that will manifest itself in higher interest rates.
The question is then: Is the economy faltering or just slowing, and what can you, as a developer, do to maximize your return on investment (ROI)?
Cost Savings Start at the Beginning
As the economy slows and interest rates rise, knowing how to save money will be a way for you to make more money in the end, thus improving the overall return on your initial investment.
A core piece of advice we give our development clients is to look for savings from the start. Fees that can be negotiated, such as impact fees and concurrency analyses should be handled by experienced professionals. This component of the application process is designed to analyze the impact the proposed building will have on utilities and public facilities such as roads, sewer lines, infrastructure, and even schools in the neighborhood. We have helped many clients over the years to save considerable sums of money, by reviewing the application with a focus on the classification of uses and vested rights.
What Are Vested Rights?
“Vested Rights” is a legal concept intended to establish and protect the rights of a property owner whereby they rely on regulations that were in existence at the time a project was either constructed (partially or in full) or permitted. In some cases, clients have bought a parcel of land with a view to developing something that a prior owner had not completed. However, despite not developing the land, they had paid significant sums in advance for the proposed development, as was the requirement at the time. However, newer laws in effect called for less fees credits that could be applicable to offset current expenses.
This process does require your attorney to know the local laws and ordinances and to have the conviction to look at the parcel history in hopes to provide significant savings.
Correctly Classify Your Development
The classification of your building will affect the application costs. Our seasoned professionals can help you properly classify your improvement such that you have the flexibility to build and conduct the type of activities on the property you wish, without wasting money on surplusage.
Ultimately, the correct classification of your proposed development may, in the end save you significant sums of money, both in terms of a percentage of the development value and real dollar amounts. For example, if you are building a multi-story building, should you classify it as a high-rise or as a mid-rise? Knowing what is acceptable and legal and, consequently, knowing what formulas to use for the calculations can save you hundreds of thousands of dollars, or more, depending on the size of the building development.
A Final Thought
The truth is, while we have focused on one or two clever ways to save money on developments, we know that saving money on the construction of a new property occurs at all stages of the process. Engineering, timeline savings, materials selected, whether you use pre-fabricated materials or build on-site, etc., will all impact how much your development costs. However, meticulous attention to detail, and having an attorney by your side to help review agreements and find opportunities to avoid risk and expense you can save significant heartache and money.
If you are looking to work with attorneys who have your best interests in mind all the time, let’s have a chat. Give us a call today.