Is It Feasible?

Let's talk about feasibility studies aka: finding out what it takes to actually getting a building built! 

In this episode Jill and Leslie sit down and talk about the importance of conducting feasibility studies especially for multi unit developments. We share our expertise in how we conduct our studies with developers in order for them to maximize their lot and get their projects approved by municipalities across the country.  

Here's what you'll learn: 

• When to do a feasibility study 
• 2 real examples 
• How we conduct our studies 
• 100% municipality approval 
• Project Highlight of the week: The Model Center

Full Show Notes

Contact us at info@threesquaredinc if you or a group you know would like to tour our Detroit Model Center.

Ready to move forward with your project? Contact us here and we will put you in contact with the right member of our team.

Make sure to follow us on Instagram, Facebook, and LinkedIn to stay up to date on new project releases, trainings, and more. 

Transcript

Copy Transcript Copied

SPEAKER_01 0:02

Welcome to the Innovative Real Estate Podcast with your hosts Leslie Horn, Brett Crandall, and Claire Olilla. We're here to make your life easier as a real estate developer and teach you everything we've learned about designing and building innovative homes, multifamily, and mixed-use structures. On this podcast, we'll be giving you our best advice, trainings, and QA segments so you can learn from our years of experience and make your innovative vision a reality.

SPEAKER_02 0:30

All right. Hey everybody, welcome to another episode of Innovative Real Estate with Three Squared. Today we are going to talk about some of the things that help make a project real. And so something that I've kind of tried to train our team around is that this conversation is not the boring stuff. I've reframed everyone's mindset. This is actually the fun stuff because it gets your building built. So let's start by talking about our project highlight of the week, and then we can get into it. So, Leslie, what's your project highlight of the week this week?

SPEAKER_00 1:02

Well, you know, I'm going to talk about our model center today because it fits right into our subject, which is, is it feasible? And when you all when we all have a project in mind, one of the first things as a developer, as a custom home builder, or even as a family wanting to build a custom home, gosh, you have to make sure that it's feasible, which is what we had to do with our model center in Detroit, right there on the corner of Trumbull and Pine Street. And one of the feasibility pieces that we're going to talk about today is hey, are we going to be able to get it permitted? And so we we had to really make a lot of early presentations on to the city, not just the planning department, but also the building department. And the model center in Detroit is a three-story, nine-container build. It is technically a single-family house. We use it as our model center. It's we we have an apartment upstairs, and the first two floors are our offices. And the apartment upstairs is also part of the model center. We give tours to that building still to this day on a weekly basis. It is considered, let's see, one, two, uh, three-bedroom, uh, one to three and a half baths. There's two kitchens, and it really is just a delight to show people. I think the thing that when people come into this building every single time, they're always just amazed what it looks like on the inside, because it looks just like a regular apartment or a regular house. That's the deal. Um, it was built in 2015. Some more little details about it. Uh, it took us six hours and 15 minutes to erect that building. That was our very first building that we had erected out of cargo or shipping containers. People driving that morning to work on Trumble got to see a crane and a whole bunch of commotion. When they drove home that afternoon, they saw a freestanding building that we it that we had erected, and um it was ready to be uh weathered in. It was ready to have windows and doors and all those other things. So that was really um, I gotta tell you, it was one of very proud moment. We had, it was our first project, very proud moment uh that day. There was a lot of tears, a lot of reflection of the hard efforts and the energy that it took to get it permitted. You know, and I'm gonna go ahead and start with um with the project itself or with with our with our topic today. Is it feasible? Because in our model center, my brother and I had gone to I think three architectural firms. We were not architects, we did not have an architectural firm, and we interviewed three firms. One of them laughed at us, literally, like, you want to build something with what? Like, literally laughed out loud. One said, heard us out, they were very good. I'm not gonna tell you their names. Um, they know who they are. One um who's also very active all over um in Detroit, um looked at us and listened to us. Um, but you could just tell that they thought we were just crazy, like on glue, or worse, you know, I mean, like just stop wasting my time. They said they put a proposal together we never heard from them ever again. Number three, we found um a delightful man, uh, Steve, Stephen Flum. And he just an incredible human being, super respectful, kind of like the idea of something new and something that would be different and unique, but also kind of cool. We actually saw it not as a fad, as a one-hit wonder. And here we go. You know, we were having those conversations in 2009, 2008. And the the beautiful thing about going to the city and talking about this project with all members of the municipality, the planning department, the building department, is that Steve was highly respected and still is to this very day. You can't walk down the halls in the building department with Steve without being stopped by every person in the department asking how he's doing, um, checking in with him. He's that kind of man. He's an incredible man. And so, uh, hats off, I always will have great respect and um admiration for Steve Flum because of his of his tenacity and his experience. So there you go. We plugged him. This is um just really excited that we have the opportunity to do so. But as we move forward here today, 2023, now 15 years later, since our conversations about cargo architecture, it is still a fast-moving uh material type that has been embraced. Not only has it been embraced by local developers all over the nation, all over the world, but it's also in the code books. It is an approved material type uh for construction. And three squared, I'm still very proud of this statistic. We have a hundred percent approval in every project that we've approached. It's probably close to about 200 approvals. Uh, we haven't built everything that we've been engaged to. However, we've got 200 plus approvals amongst all municipalities around the nation. And I have to share with you, we have the expert on our call today, you know, and our expert is our very own Jill Ramirez. And she has been, I think, the foundation of getting all projects in every municipality approved. And, you know, it's a process. You know, when we start talking about feasibility, and three squares been approached, gosh, I'm gonna say over the last six months, many times now, for feasibility of projects. And it's not just the feasibility of cost, because we we are focusing now, as you all know. We have got to make sure as an architectural firm, we that projects can be built. We don't want to just design a project, take someone's money just for the sake of that that exercise. We want to make sure that people are prepared for the road that they're going down. Developers, single-family homeowners, and and builders. The key though is is it feasible? We just recently have been approached um by a by a developer out of Alabama. And three, they have 161 acres, and their initial output is going to be 300 homes. So is it feasible? Is it feasible for their pro forma? Is it feasible for a lot of a variety of items, including uh how are we going to approach this with the municipalities? And so we we've we've done this. Um, you know, what's the cost going to be involved with it? And more importantly, what is the process in order to get it approved? And so I think I can probably stop right here and really bring in Jill for this conversation to really talk about like what her role has been in these feasibility studies. And Jill, please feel free to uh add to what I've already shared, um, even on single family homes and such. But you know, your role has certainly taken a shift over the last, I guess, three years. Um, and it's exciting to see the process that you take, even in the initial approach to a project. Jill, what have you got for us?

SPEAKER_02 9:12

There's so many things to walk you through this process because making a building real is unique for every single municipality. So I'm excited to see how that kind of changes, how municipalities are going to work more with people so that you can get your project built. Um, that we've talked about it a million times. There's so much red tape. And it's interesting that post-COVID, people are kind of working around like, what's what's the bare bones that I can get approved and just work with the municipality to get my project done. Um, so feasibility studies, I want to say, are relevant for any project type. You can do them for a single family home because you still need to know what are the rules to put your project into the ground. You you've got to find out your buildable lot area. Um, what are your setbacks, what's allowed, what type of building is allowed, what's your zone, all of those things. But I think a feasibility study is most important when you're working on a larger scale project because if you're trying to build a 300-unit building or multiple homes on multiple lots, there's just so many rules that it's like, where do you start? We're the team that knows how to get you started. And so we work with the municipality, we go to them and we we bring, we kind of frame the conversation by asking, what is your process? What do you want to see? And we're flexible to bring you the information that you need to see and potentially even make changes to make sure that this is going to get approved. We've gotten projects approved in HOA communities with very strict rules that just scraped by with approvals. And we met with those specific people and made some changes that they requested, and then they approved those buildings. So, all those kinds of things we have to tailor into our narrative, our timeline to make sure that we can equip you with a project that's going to get built because that's our biggest goal at the end of the day. We say this so many times. We want to work with people who are going to get real buildings built. Real people want real buildings. We want to work with you. So, in terms of um working with a municipality, I mean, we always ask them what type of timeline are we going to expect in terms of when we submit, how long do you need to review? What's your process for submitting comments? How do you need those comments resubmitted so that we can get 100% approval, get that building permit in, and then get you under construction. We've started to work with clients that know how to work with municipalities and have those same conversations. And they actually start to develop really unique relationships with the municipalities that allows us for even broader possibilities. So I guess some somewhere I can start to shift the conversation now is how can you work with a municipality and kind of rewrite the narrative with them? I think post-COVID, some municipalities are very open to feedback from experienced people building real buildings and how they can work with you to kind of like change what their rules are. So sometimes that might require a rezone, which we're not really a fan of rezoning because it does take a little bit longer. There's a lot of fees required, but they might allow just a variance, which is much much easier to get approved than an actual rezone. So a variance kind of helps you to go outside of what might be included in the zoning ordinance with a certain municipality. That zoning ordinance is going to have all the rules mapped out for what's allowed. And if you're trying to bend those rules a little bit, the first person you need to get in contact is not three squared, but the municipality. And then get in touch with us, and you'll get on the phone with me pretty near in the future to work with that municipality and just see like, what are you willing to do? Because we've got this really great, exciting idea. We want to bring it to this particular city, and that can be like a selling point for people to come to that city and get the economy flowing in that city where it might not have been previously. So, like, what are the new potential for projects that this new city can become a hub and a place for people to have like, hey, we've got a ton of homes here, we've got a ton of businesses here. So it becomes like a selling point, not only for that client working with the city, but also the city itself. It becomes like a very mutually beneficial situation for everyone involved in the project.

SPEAKER_00 13:54

Jill, I thought that all municipalities have the same permitting process. Absolutely not. I set you up for that one. What's that? I set you up for that one.

SPEAKER_02 14:09

Yeah. Okay. So every municipality is going to have a different set of rules. Everyone has a zoning ordinance. Everyone has zip different categories of zones. And so your zone is going to tell you like you're allowed to build a single-family home or a two-family home, potentially a quad or multifamily homes. Are you allowed to build commercial or mixed use? There's all different types of categories, and it just essentially tells you what's the bare bones of what's allowed to be built here. And a lot of municipalities have special exceptions, special uses that require a little bit of additional approvals. But again, those are things that we all have experience with navigating and getting approved because we know what the municipality wants to talk about and wants to get approved and wants to hear. So we actually partnered with a civil engineering team that allowed us to get parcels divided and get more built across those parcels to make the numbers pencil for the client. So they can work on their development in a way that makes it much easier for the team involved and make it more economic for everyone at the end of the day. And then at the end, very end of that process, the end user benefits as well. So it's kind of like a trickle-down effect that all just starts with the zoning ordinance. Um, to go back to the question about like, hey, isn't every municipality the same? Every municipality also has a different submission process. So that's why typically I'm getting on the phone with the municipality saying, like, what's your what's required to submit for a building permit? Do you need hard copies? Most municipalities at this time are thankfully electronic submissions. Back in the day, you used to have to submit hard copies folded a certain way. You've got to put a wet stamp and have the architect sign and seal every single sheet. Thankfully, that those times have changed and things are getting a little bit easier in that way. But all of those things have to be a consideration because you need a complete package, a 100% permit document package to get approved with the municipality. And everybody's got different requirements: structural engineering, mechanical, electrical plumbing requirements. Sometimes there's even specific environmental requirements, like you might have wetlands or an erosion zone that you have to protect. So all of those things come into play with our conversations and affect a building's timeline. So, Leslie, what other typical questions do you think are good ones that we get from clients that we really know how to navigate at this point in time?

SPEAKER_00 17:13

Yeah, I think that I mean, and you hit the wetlands and I forgot about erosion. I mean, there's stormwater management, it's all those things that a lot of municipalities um don't, I mean, that it's different amongst each one. I think for um, you know, as as we're navigating through our developer clients, I mean, we've got one up down in um near in Fort Wayne, and we're we're doing 38 houses. It's infill houses, infill lots by one developer. I think that would be a really I want to talk about two different types of processes that you've taken. And I want to start with that one, and then I also there's another one I'll we'll talk about next, which is the 300 units. Um, and and really what are we looking for in presenting as a feasible opportunity for the client? So tell us a little bit about what your role is and what the team's role has been in the in the 38 um feasibility study that we were engaged to provide. What were you guys, what are what is the team doing for those for that project?

SPEAKER_02 18:14

Yeah, so that project in particular is pretty exciting because our client, shout out JT King. Hey, JT was really flexible with us in terms of like, hey, I just want to see what I can get built here and what's the best thing to build per lot. 38 lots is a big number. So I really started with how much can you build per lot? Because some of those lots that he gave us were kind of tight. And so we were like, okay, if if you've got a tight lot, you really can't be putting a quad here. You've got to stick to a single family home. Some of those lots were actually corner lots, which are considered unbuildable by the city, so those automatically required a variance. Luckily, I think there were only three or four of those lots, but we knew right away that was an additional rule, and that was all corner lots are unbuildable because of the setback requirements. There's an additional setback on a corner lot because there's a certain setback distance from the street on both the front and the side yard. That those corner lots, it was like if you had five feet to build, you're not going to be able to even put a shed there. So you're gonna have to get a variance so that you can exceed those setback requirements and actually build something on those lots, which luckily the jurisdiction is willing to work with us, but we knew right away that that was going to be a little bit of a timeline and price extension on just four of those 38 lots. So it's information like that that all factors into the overall project expectation that we figure out early on so that the client knows what to expect at the end of the day and working with whoever their end user is and their building team. They've got to know when they can get boots on the ground, when they can get everything under construction to make it most economic for making their project feasible. And so the next thing that we started to look at is hey, we've identified there's like 15 lots here that are significantly larger, or lots that are directly adjacent to each other, that you could potentially combine those lots and get a bigger development there if you choose to. Because for some clients, they might say, hey, I can get a quadplex going, but I'm really not in the budgetary um expectation to be able to put a multifamily development here that exceeds anything over a quad. So that 300 umit project that Leslie's got under her belt, I'm I'm starting to transition there. But let me just wrap up the conversation about Fort Wayne first. So at the end of the day, we were working with our client to establish which lots are best suited for multifamily versus single-family homes so that we can get the most housing there because there's a housing shortage across the board for the nation right now. And luckily, a lot of municipalities are working to address that. And so we love working with Fort Wayne because we've got them essentially on speed dial. JT's got a really great relationship with the municipality. I've got a direct email contact. They're very responsive and flexible with what they're allowed to put there. So I think that kind of really sets the wheelhouse for how that project is going to move forward. And we know we're going to get it done. So it's just a matter of framing what are the rules? How can we bend them if we need to? And then what's that timeline? And how is that going to impact the overall project to get this thing on the ground?

SPEAKER_00 21:46

And then the bottom line of that, and and the bottom line of all projects are budgets. And is it, you know, and this will be a great segue into the 300 housing unit. Thank you, Jill. Because at the End of the day, uh JT knows his building costs. Um, uh, our developer, and we're gonna have him back on. He's been a guest in the past, and we'll have him back on um to give us updates and and such. But the beauty about this as a developer, you as a developer, I can't stress this enough. You have to know your costs. Three squared cannot tell you, your architect can give you an overall, but we're gonna be conservative in our numbers. You as a developer need to know your cost. I tell you, it's like night and day when we have developers who are experienced coming to us because it's a simple yes or no. Hey, can you design vertical only? Forget about any of your horizontal costs. Horizontal cost are utilities, foundations, everything up to the moment, you know, every when your foundation is done, vertical cost rising, right? When we have a client come to us and say, I need my my vertical cost to come in at whatever a square foot, as a as a as an architect, we're running our numbers. We're like going, hmm, it's going to be tight, but let's work on it together to make sure in our feasibility study that it can absolutely happen. And we're doing that right now. Um, we were brought this challenge. Um, we've already spoken briefly to uh people in the city, but we've also been talking to the developer and quite honestly all their funders. And it is a challenge what we're doing, but I'm gonna tell you right now, it's going to happen. Can you imagine 300 housing units being built?

SPEAKER_02 23:43

I absolutely can because we're the people that are gonna make it happen.

SPEAKER_00 23:47

Yeah. And um it's it's all about economy of scale at this point. And this is the beauty about this. You know, we're doing it for, I mean, each door is gonna run close to 90,000. But get this vertical costs are gonna be coming in a lot less than that. Um when we talk about per door, you have to consider all of your vertical and horizontal costs, right? And so it's not just the construction cost of a door. It's it's it's your it's your construction cost plus your permit fees plus your utilities. And one of the things that we're doing in this is doing clusters of homes. So you've got neighbors, et cetera, you know, in a small cluster of a fourplex or a you know, a five plex. We're working on this right now, but that's part of our feasibility process. How can we share some of your vertical uh horizontal costs? How can that be spread out in a neighborhood where you've got land, right? Where you you've got the land to do it, but you don't, but you've really got to bring in new utilities. And there's, you know, again, to Jill's point, we have a housing crisis, affordable, attainable housing. And developers are out there. There are, you know, there's there's a lot of opportunities for developers to come in in opportunity zones. And the bottom line is this it has to make sense. Everybody needs to profit from this. And so, and it has, I mean, there's there's grants, there's a lot of different uh funds available because we know that in the United States there's this crisis. So at the end of the day, what is available? What can we do? And you know, we're providing a great feasibility study right now for this for this group of developers, very experienced developers, I might add. And at the end of the day, we think it's gonna happen. We really do. Um I wish more, I wish there was more, I wish there were grants, uh, and I'm sure there are, but I I feel like this is where we need to focus on, in addition to some land that's available, but also upcycling um buildings that are just sitting vacant and malls and such. I'm gonna get on a soapbox, so I'm not gonna go down that road, but you guys know where what road I was gonna go down. We have to be better stewards. Uh, and I think developers are seeing that. Um, and in addition, being able to have some profit, uh, you got to be paid for your time in order to do so. Um, Jill, what other things do you think we can wrap this up with? Because I feel like um at the end of the day, our clients, well albeit developers building, you know, uh a thousand homes, a hundred homes, or our single mom and pop wanting to, you know, build on uh a lot next to them that they've had in the family. Um, you know, is it feasible? I think, I think that's the biggest and first question that we all have. Any closing remarks from you, Jill, that I think might send our listeners down the road of possibilities?

SPEAKER_02 27:16

Yeah, I think one of the most exciting possibilities here is if someone comes to us with like a tight budget, we know some of the tips and tricks for certain areas that can keep your budget in check. Like the more window types that you have that are the same, the cheaper your window order is going to come in. If every single window is a different shape and size, your window order is gonna be a little more expensive. So that's kind of one of the more exciting pieces of a 300 unit complex, is that the more you copy and paste in those units, the more affordable it becomes. So your ground costs, like your horizontal slash soft costs of your overall development are going to be what they are because you have to service this building and get it up and running and get electricity to each unit. So that's going to be part of the narrative, regardless of what you build. So, how do we maximize what's going vertically? How do we maximize what's going into the hard cost, the construction cost of your actual development? And again, that all kind of ties back to the zoning ordinance. What's the maximum height? Are there some variances to maybe get it even a little bit higher than what the zoning ordinance might allow? So that you're really maximizing what you can build there and make it affordable for the developer, make it affordable for the end users who are inhabiting that 300 unit complex. So those kinds of things make me really excited to work with people and get it physically built and have like a tangible product at the end of the day. Um, those kinds of things we love to talk about because we kind of we work with contractors and talking about buckets of money. And a lot of that conversation is um kind of easily tailored when it comes down to materials, fixtures, finishes that are going into a project. You can kind of scale those back easily. But the actual sticks and bricks of making a building physically built and feasible are going to cost what they cost. I think we can get so many more conversations here, Leslie, about how there's a shortage of tradespeople. And that's why building costs are going way up. But those are like three or four more podcasts we can leap into this conversation. Let's keep ourselves focused here. So I think at the end of the day, what we're excited about is maximizing the potential of your project regardless of the scale. We can investigate so many possibilities into understanding what's allowed there and work through the municipality, work with you as a client and make your building real.

SPEAKER_00 29:47

Make it real, baby. That's right. I love it. Jill, fantastic. Well done today. All right, listeners, can't wait for our next podcast and uh have a great, great week. Thanks. Yeah, stay tuned for more. Thanks, everyone.

SPEAKER_01 30:06

We hope you enjoyed this episode. And if you found it so valuable, you want to connect with us one-on-one, click the link in the description to tell us all about your project so we can help you get started. And to get notified on the next episode here on Innovative Real Estate, go ahead and subscribe to the podcast on iTunes so you never miss a beat. Get out there, put today's advice into action, and we will see you in the next episode.