Finding the Right Developer for Your Land (Podcast Ep#172)
Eugene Gershman, a developer with 23 years of experience in construction and land development, discusses how to find the right contractors, manage construction costs, and navigate the current market challenges in residential and multifamily development. He emphasizes the importance of contractor experience with similar product types, detailed cost analysis beyond lowest bids, and complete architectural drawings to avoid costly change orders.
Summary
Eugene Gershman shares his journey from reluctantly joining his father's construction company to eventually founding a development partnership business focused on helping landowners develop their properties. He explains how his company evolved from fee-based consulting to taking equity stakes in projects, ensuring alignment of incentives with property owners.
When discussing the relationship between developers and contractors, Eugene emphasizes the critical importance of selecting contractors with specific experience building the same product type. He explains that the separation of responsibilities between developer and general contractor is often misunderstood, with many people conflating these roles. He shares his decision to exit construction operations and focus solely on development, citing the significant personnel and management overhead required for construction versus the lean teams needed for development work.
On the topic of cost analysis and bidding, Eugene argues against selecting the lowest bidder without detailed scrutiny. He describes his methodology: analyzing bids line-by-line, identifying scope discrepancies, and focusing negotiations on contractor markups and general conditions rather than material costs. He emphasizes that concrete prices shouldn't vary dramatically between bids, and significant variances indicate missing scope items. Eugene also stresses the importance of working with contractors you're comfortable with, as problems will inevitably arise during construction.
Eugene identifies two commonly missed elements in residential projects: finishes specifications and detailed construction drawings. He explains that permit-level plans are often insufficient for actual construction, leading to RFIs (Requests for Information) that can delay projects by weeks. He notes that architects often provide minimal plans to meet permit requirements, but contractors need much more detail to build efficiently, and the lack of detail frequently results in change orders that owners find frustrating.
Regarding market conditions, Eugene describes the current environment (at the time of the podcast) as very challenging. Construction costs have risen significantly since COVID while real estate prices in the Pacific Northwest have declined, making most projects fail to pencil out financially. He forecasts a two to three year timeline before the market stabilizes enough for development projects to become viable again, citing population growth and housing demand as long-term positives.
About this episode
<p>What actually goes into developing a piece of land, and where do projects usually start going wrong?In this episode, Jessey sits down with developer Eugene Gershman to talk about what he's learned from more than 20 years working across both construction and real estate development.Eugene breaks down what he looks for when choosing contractors, why experience with the same product type matters, and why simply choosing the lowest bid can end up costing you significantly more.They also get into some of the details that owners often overlook, including incomplete construction drawings, missing finishes, change orders, and the difference between getting plans approved and actually having enough information to build from.They also talk about today's development market, why many projects are struggling to pencil, and how Eugene evaluates whether a property is worth moving forward with.What you'll learn:- What to look for when choosing a contractor or development partner- Why experience with the same product type matters- How incomplete plans and missing scope can lead to expensive change orders- Why a project that works on paper can still carry significant riskConnect with Eugene Gershman:Podcast: Real Estate Development: Land to LegacySocial: @eg_developerEugene Gershman Personal: https://egershman.comGIS Companies: https://giscompanies.coLinkedIn: https://www.linkedin.com/in/eugenegershman</p>
Key Insights
- Eugene argues that contractors with specific experience building the same product type are critical, as this experience directly translates to better project execution and fewer surprises.
- He claims that analyzing construction bids line-by-line to identify scope discrepancies is more important than simply choosing the lowest price, because material cost variations of 50% or more indicate missing scope rather than true cost differences.
- Eugene contends that contractor markups and general conditions (payroll, overhead) are the only appropriate areas for negotiation, while material costs should remain fixed based on subcontractor quotes.
- He argues that permit-level architectural drawings are fundamentally insufficient for construction, as they lack the detailed specifications needed to actually build, leading to inevitable RFIs and change orders.
- Eugene claims that working with comfortable, trustworthy contractors is essential because problems and conflicts during construction are guaranteed, and relationships determine how effectively issues are resolved.
- He states that the current market (post-COVID) presents a significant challenge where construction costs have risen while real estate values have declined, making most development projects uneconomical.
- Eugene contends that contractors take substantial financial risk on thin margins (2-15% depending on project type), meaning a single mistake can eliminate all profit while still requiring project completion.
- He argues that the separation of development and construction roles is beneficial because it allows specialists to focus on their respective domains rather than spreading resources across both high-risk functions.
Topics
Transcript
Hey, how's it going? It's Jesse here from the Land Investing... Hey, how's it going? It's Jesse here from the Land Investing Business Secrets Podcast. I've got a guest here, Eugene Gershman. He comes from a background of development and construction. He's been on both sides of the fence there and works with a lot of landowners. And I think this is a really interesting show and episode as he sort of talks to us about the nuances and the things that he really keeps an eye on when it comes to development and what he's looking for. Anyways, I hope you enjoy this episode here with Eugene. All right, welcome back to the podcast here today. I've got a…
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