I’ve already spoken about why I became a developer and offered some insights into how you might be able to transition from architecture into development. So now I’d like to start focusing more on the day-to-day of what it means to be a real estate developer.

And since I seem to be getting a lot of questions from readers on career and development related topics, I’ve decided that I’m going to turn these posts into a regular blog series. Right now the working name is “Developer Dirt”, but if you have a better name I’m all ears (let me know in the comments below).

So let’s start with step 1.

You’re ready to develop a new project and you’re now in the market for some land (also known as a site). It could be a greenfield site (meaning it’s virgin land that hasn’t yet been tainted by humans) or, on the other end of the spectrum, it could a brownfield site (meaning it probably once housed industry, it’s contaminated as all hell, and you’re going to need to clean that puppy up before you build).

Without going into further detail about all the different kinds of sites you could potentially buy (which is a post in itself), here are 3 high level things to keep in mind as you move forward.

Land is the residual claimant

What this means is that you want to start with your top line. You want to start with revenue. What can I build on this site (use and square feet) and how much can I ultimately sell or lease that space for?

Let’s say, for example, that you think you can build 100,000 square feet. If it were office space, you’d want to know that rents in your area are $30 per square feet and that that’s going to render you $3M a year in rental income. If it were residential condos, you’d want to know that the market is absorbing $500 per square foot and that if you sold 100,000 square feet worth of condo, that your revenue would be $50M. But remember this is top line.

Once you know your top line, you then need to figure out what it’s going to cost to bring you that revenue stream. In other words, what are the hard costs (construction costs), the soft costs (consultant fees and other non-construction costs), the return my investors are going to demand, the money I need to keep the lights on in my business, and so on.

Hopefully, once you’ve calculated all of these numbers, you’ll have some money left over from that original top line number. That residual money is what you can reasonably afford to pay for the land, which is why it’s often referred to as the residual claimant. But even though it comes last in this example, it comes first in development. If you overpay at the onset, it’ll be an uphill battle the rest of the way.

You often don’t know what you can build

But here’s the rub: You often don’t know exactly what you can build. When developers buy land they often consider what they can build “as-of-right” and what they think they can build as a result of variances, rezoning and other discretionary actions.

As-of-right basically refers to what the current zoning permits. It’s what you could go out tomorrow and build (after you get the requisite permits of course). Unfortunately though, as-of-right uses and densities are not often inline with what’s actually happening in a neighborhood. So you need to go into the city for things like a zoning by-law amendment.

Similarly, vendors want the most for their land and so they’re going to be aggressive on this front. As a developer, this is the point where you surround yourself with a team of smart people who can help you figure out what’s reasonably attainable for the site in question. And sometimes you have to worry about the politics as much as the planning.

Approvals are uncertain

During the due diligence phase, the goal is obviously to mitigate as much of your risk as possible. Nobody wants to get stuck with a piece of land that they overpaid for that they now can’t (profitably) develop. But sometimes shit happens.

It may seem like a no brainer. You could have a site that’s surrounded by transit with lots of great precedences (this matters) for the height and density that you’re hoping to obtain and that you feel will be appropriate for the neighborhood. But sometimes the stars don’t align.

And that’s why development is a risky game.

As of today, Family Day Monday, you’re going to start seeing information released regarding TAS’s (in partnership with Main & Main) newest community called Kingston&Co. It’s located on Kingston Road, just east of Victoria Park Avenue, in a neat area called Kingston Road Village. You can already register at kingstonandco.ca. And as part of the registration process, we’re also soliciting feedback as to the types of retail the community would like to see added to the area. Note: There’s already a Starbucks :)

At the same time, we’ve also launched a redesign of our corporate site (tasdesignbuild.com). The biggest change is that we’ve taken the blog–which was hidden under a “Neighbourhoods” tab–and made it front and center on the homepage. We see this as a pretty significant change. One that shows that we would like you to join us in a conversation around city building. We now allow comments on all of our blog posts and you can see right on the homepage who the author of the post is.

If you have any feedback on either Kingston&Co or the new homepage, we’d love to hear from you in the comment section below.

Over the past decade, Toronto has seen a proliferation of condos across the city. And while I do think this intensification is a great thing, we’ve been much better at building towers than anything else. We’ve neglected medium density development and it has bifurcated our housing market: you’re either in the market for a condo or for a house.

And since we’re not really building anymore of the latter, Toronto has become accustomed to bidding wars and multiple offers. Every young couple I know is in the market for an “hip fixer-upper in the city.” Problem is, that’ll cost you $700,000 or more and you may still need to gut it.

At this point, it’s not realistic to expect that we’ll be building anymore single family homes in the city—at least not at any sort of significant scale. We’re tapped out. But what we can reasonably expect is more medium density development. I’m talking about midrise developments along our avenues, laneway houses in people’s backyards and other creative infill solutions that sit somewhere between a house and a highrise.

If we’re concerned about creating equitable housing opportunities, then we’re going to need relieve some of the pressures on low rise housing. We’re going to need more diversity in our product offerings.