Last week I posted the question “WHAT WOULD BE YOUR BIGGEST QUESTIONS TO ASK AN ARCHITECT/DEVELOPER?”
I then caught up with my developer friend Kenny Martin for a chat and to discuss some questions that had been requested by a number of people in these property communities. We thought it would be fun, and helpful, to record the conversation to share with other property investors who are considering development.
Kenny and I were on the same mentorship programme and various courses back in 2016/17 and since then he’s accomplished a lot. He has always run his own architect practice, Block Architects, and pivoted into developing his own sites with JV partners a few years ago. He’s now developed 60 houses and counting so knows a thing or two.
I picked out a handful of the questions to put to Kenny and we recorded the whole thing.
Below I’ve captured a topline overview of our discussion and if you’d like to dig into more of detail you can watch the recording (link at the bottom).
Q. WHEN IT COMES TO INITIAL DESIGN – HOW MUCH DOES A DEVELOPER RELY ON THE ARCHITECT?
A. In many cases the developer often relies on the architect too much. A developer can’t expect the architect to understand the specifics of the business model behind the end use of the building. At the beginning of a project, and before any drawings are done, the developer and architect need to work hard together to hone in on what the business plan is (ie the desired end building and how it serves the people using it) and how that will impact the building design. It really does depend on the experience of the developer because the experienced ones will know this stuff already.
To help clarify what is being delivered by an architect it’s wise they use a fee appointment document at the beginning of the project – this will outline what is required and what is being provided.
As a developer you need to understand the varying degrees of service available from the architect and you need to understand what it is you’ve actually paid the architect to do.
For Kenny’s full response watch from around min 16.
Q. WHERE DO YOU FIND THE LAND AND HOW DO YOU CALCULATE HOW MUCH IT IS WORTH?
Kenny said it all comes down to relationships and networking – letting multiple people know what you are searching for and the proactive process of asking for referrals. Kenny refers to a number of referral sources and types of people he speaks to around min 29.
In regards valuing the land we joked about how the go to formula of yesteryear of a third for profit, a third for build and third for land is something that just can’t be applied these days. Clearly there are so many variables and appraising a site is no mean feat.
Having established realistic comparables from other houses built in the last few years Kenny will work backwards from the GDV to establish the land value. There is a fairly involved appraisal process he goes through to establish key aspects for example: a build cost from the foundations up, ground works, foundations and utilities – and these will all be specific to the site. (For more detail on that watch around min 39. )
Q. WHAT KEY THINGS HAVE YOU LEARNED BY MAKING MISTAKES?
A. Be sure to invest the time to build solid rapport with JV partners and a clear understanding of what each other wants and brings. Outline the roles and responsibilities within the partnership as it relates to the various parts of the project.
Kenny also points out as a learn is that whilst developers can be attracted by the upside of selling what they’ve built, it’s important to also think about creating the opportunity for future recurring revenue. In other words, not to sell everything you develop but retain some assets to let for ongoing income.
What’s important, is it about the lumps of cash or is it about creating freedom through cashflow?
(For more on this part of the conversation watch from about min 56.)
Q. WHAT SHOULD AN INVESTOR/DEVELOPER LOOK FOR IN AN ARCHITECT AND WHAT ARE THE TOP THINGS TO ASK WHEN LOOKING TO WORK WITH ONE?
A. Don’t make a decision based on price but rather look to understand what the value of their service is. You’re looking for value rather than a transactional price
-Ask for testimonials and references to see their past work – you want to assess their ability to deliver the quality that suits your project on other sites they’ve done. Physically walk round buildings of their past work)
-Get a feel for what people who use the building think about it – that will give you an idea of how well the architect met the brief.
-Assess their communication ie willingness and time to respond
(For more on this part of the conversation watch from about 1h 3 min.)
Q. I’M LOOKING FOR AN ARCHITECT WHO CAN WORK WITH ME AS PART OF A TEAM AS WE MOVE INTO DEVELOPMENT PROJECTS, SOMEONE TO HELP WITH GUIDANCE RATHER THAN JUST A TRANSACTIONAL AGREEMENT. ANY SUGGESTIONS?
Kenny suggested to start local and ask for referrals. Look for the architects who have experience in the same kind of developments you will be doing. Bear in mind that some architects will do ‘at risk work’ ie putting time into things without a guaranteed fee/payout so do respect that the architect will either require a fee or a stake in the project. Kenny very honestly pointed out that a fee rather than a stake in the project is going to be the cheaper option for the developer. (check out min for more detail).
(For more on this part of the conversation watch from about 1h 9 min.)
As promised, to hear Kenny’s full answers and get all the detail from our conversation check out the RECORDING HERE Whilst a long video there are nuggets sprinkled throughout.
Was that helpful? What follow up questions might you have on this topic?