The Importance of Financial Guidance and Structured Phasing

Background

A developer who was constructing his first Common Interest Development approached us. The project was a gated HOA Community that featured several large and captivating common areas. Prior to this project, the developer primarily worked on projects exempt from the DRE process, such as standard subdivisions. The Common Interest Development he was working on consisted of 250 lots. With projects that size, it’s ideal to have about 20 phases.

The Problem

In this case, the developer had reached out to us because of his experience working with another consultant. His sales went from 10 per month to 3. It was then after we reviewed his project that we discovered he had only 1 phase for his 250-lot project. His previous consultant did not do their job of advising the builder to implement a structured phasing program. Because the consultant provided zero guidance, there was no phasing structure and the builder had to pay exorbitant fees, which amounted to more than $200k annually to cover HOA dues after sales slowed down.

How We Helped

Unfortunately, it was too late for us to step in. Because the developer had already made closings, all sales would’ve needed to be stopped and the whole project would have needed to be restructured. Nonetheless, we provided him with guidance on what he needed to do next to successfully realign his project.

Key Takeaways

We’ve come across several developers who had been previously tied to another consultant agency where they failed to do their job. With projects of that scale, we always encourage our clients to implement a well-structured phasing program and to make sure common areas are transferable incrementally. Otherwise, you’ll find yourself “breaking the bank” to cover monthly dues.

 

At California Builder Services, we are committed to providing sound financial guidance and fostering trust and partnership with our clients. We strive to be a trusted ally, ensuring peace of mind and a shared sense of purpose.

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