David Lokee in Republic of Panama
by David Lokee
First of all Merry Christmas, wishing you the best for 2010 as well. My name is David Lokee and I am 23 years old, and I read your course beggining this year (09), and I have to say this is the greatest experience to start the first construction of 3 homes.
I was a former real estate broker in Panama City Panama, until I decided to go into renovation of single family homes, and finally I have started foundations of these homes and we are programmed to finish in almost 3 months from scratch.
I have to say from the market research, land lookup, topographic study, zoning check, land acquisition, plan designs, preproject approvals, and finally my construction permits, it was a period of around 4 months before I felt ready to go after I had all my permits and quotes done from a proven track record contractor.
My question or concern is, how we, as business people, handle the lag of time that passes when your developments depend on bureacracy of governments?
I have done other deals where I previously rezoned land and sell it, or buy a lot and design an approved project, with all permits including environmental impact and sell it too another developer, but the time frame is sometimes on average 3 months to get done, if not more even calling my arquitect at least 3 times a day.
What has been your experience regarding this and how did you managed that at the begining of your career?
First of all I have to say that it is great to hear that you are benefitting from my course and importantly "putting it into action;" congratulations!!
At 23 years of age you are achieving well above your normal 'fighting weight' believe me, so take time to look in the mirror and say 'good on you.'
Now to the main point of your email. Governments are not there to assist you 'in any way.' They are there to impose restrictions on commercial activity by imposing additional rules and regulations (red tape) that slow down your work.
They see you as an income gravy train on who they can impose costs and fees while forgetting that all costs get passed on to the buyers (voter) with your profit margin on top.
You must remember that governments produce no wealth - you do! All they produce is words and paper and to justify their existance they must produce more every year than they did last year.
So by your hard work, risk taking and success you provide employment to your immediate community as well as the greater community when you fit out your project with all the products you buy and put into your project.
All governments do is add extra cost to your project that is ultimately paid for by their voters when they buy your houses; OK?
So that is a fact of life for developers. In my city it costs about $50,000 per lot for government charges in a residential subdivision. Yes, a 100 lot subdivision will cost you $5,000,000 on top of your land cost and construction cost.
That is before you dig one hole, so that is how bad it can get and gives you some idea of what you can compare your costs too.
Now you know that you pay interest on that all the way until you can sell the 100 lots, so the $5.0 million grows in size.
The same situation applies to the amount of time it takes them to approve your development. In my city it can take 18 months to get a very simple approval.
So you have to do what the rest of us do. We first of all accept the reality of the situation. We then create and get others to join Real Estate Bodies like the Urban Institute and lobby government to stop imposing more rules and costs.
Now when you become wealthy, you will stand out in your community as your personal standard of living increases. This give the politicians the opportunity to point at you as exploiting the average voter/buyer and that is why, we the government, need regulations to control you.
It is the chicken and egg story and we all face the same situation, no matter where in the world we develop.
In simple terms we just add the imposed cost and time penalties to our project costs and pass them on to the buyer. Yes, that creates inflation, but you did not set out to change the world, you just accept the reality of the world you live in.
Not a great story, but it is a reflection of the real world.