The AIA Project Delivery Knowledge Community (PD) promotes the architect’s leadership role in all project delivery methods by assembling and distributing knowledge and best practices for a variety of project delivery methods, e.g. design-build (DB), integrated project deliveries (IPD), and public-private partnerships (P3).
To Edward and All Architects:
Over the last several years, I decided to modify the traditional approach to the single family market in my area, and this involved becoming the planner, developer, and architect.
I found properties and lots which were desirable and bought lots or land parcels. After developing site planning in accordance with planning and zoning regulations, during the purchase due diligence period, I secured City approvals, then closed on the purchase.
I offered the lots for sale to individuals and/or builders at market value, and paid few fees to realtors, but paid a buyer's agent fee, if a buyer was brought to us by a realtor. If brought by a builder, I will pay the builder a fee if they do not end up with a build contract. My property sales contract has an addendum which identifies me as the architect with design control. This can be a deed restriction added to the property or simply a side agreement signed at closing.
I developed schematic designs to market the property and provided these "idea sketches" with my marketing materials. Also, after receipt of a deposit from a buyer, I will develop schematics to their requirements, and develop the design further after closing. My sales contract does not require buyers to use me as the architect for development of a final design nor construction drawings, but does require the buyer to submit their designs and plans to me for approval, prior to proceeding with city permits for construction. Some builders have their own team of engineers and house plan drafters, and they can use their own resources, with my oversight, as I control the design via my review.
I formed a separate LLC for this practice. My local banker provided loans for land purchases and construction loans. I have also established working relationships with realtors who have lots listed for sale, builders, and all city planning and development officials. My presentations to city hearings for variances, zoning, etc. provide me with free publicity. My signs on lots for sale, don't just say "For Sale", they offer a developed homesite available with schematic design options and freedom from being controlled by a realtor or builder. I don't ask for work from realtors and builders, but they have freely brought potential clients to me.
My first year with this business plan produced results which far exceeded my expectations. I purchased my first property with a down payment of 25% and loan of 75%. I subdivided a large lot into three smaller lots and sold two of these lots with schematic designs. The first two lot sales paid for the property with all costs and yielded a 20% profit over all costs. The sale of the third lot was 100% profit, and fees from all architectural work added to the bottom line.
Builders brought two larger residential projects to us which had challenging sites and regulatory complexity. Of course, we had an advantage over plan services and unlicensed designers for these assignments, due to our experience and professional approach. Also, a builder asked us to propose construction administration services to their client for renovations of a large condominium development, and from that assignment, we obtained two additional contracts for multi-unit condominiums.
This method has produced the best results ever in this area. We are currently planning our next project, a larger parcel which has been overlooked by developers due to its challenging topography. We expect this property to yield 25 + well-located lots overlooking an area which we want to designate as a natural preserve.
There is no need for an architect to wait for projects to be brought from builders. An architect can start with a single lot purchase, with a nominal deposit (completely refundable), as you can add a feasibility phase period in the purchase contract, to close in 30 or 45 days or more. In that time period, a purchase contract can allow you time to market a sale of the property, obtain zoning or city approvals, etc.
In one of my first residential purchases, I bought a property from my client, who decided not to develop it, due to family financial considerations. The purchase contract included a nominal deposit, with a feasibility period to do planning and obtain a zoning change. We closed on the purchase months after the contract offer with zoning approved. This produced an immediate sale of the property to another developer at a profit of twice our purchase price and an architectural project opportunity for an office development. The profit on this sale exceeded the entire income made from the prior year significantly.
I have previously built houses for resale, as the architect and builder. This yielded even greater profits per home, but came with added risks. Other architects have also taken this path. However, I do not recommend this additional service, as it often takes longer to build, produce a sale and requires a larger net worth to obtain the construction loan. Also, there is the potential holding period and associated costs.
At this time, I enjoy more design and financial freedom in my practice than ever before. The added work, profit and increase to my net worth was significant in just the first year. We are now in the fourth year with this business plan.
Should you have any questions about this approach, please contact me directly, and I will gladly provide additional information.
Joel Reitzer, Architect
Fernandina Beach, Florida