If a picture is worth a thousand words, then the right diagram is worth at least ten thousand.  I am very grateful  Jim Heid of Urban Green has boiled down the difference between Large and Master Planned Development and Small and Incremental Development into the series of excellent diagrams above.

I recently had a conversation with a bright guy in a Masters in Real Estate Development program at a serious university.  He was wondering if a Real Estate Investment Trust (REIT) would be a good vehicle for people in a local community to be able to invest in small projects in their neighborhood.  Just to set things straight, a REIT would not be a good vehicle for this as a REIT has to have a lot of property under management to justify their existence and overhead, so the structure would be way beyond the scale of small projects in a specific neighborhood.  Investors would own shares in an outfit that owns a large portfolio of a specific type of real estate.

-But the conversation reminded me of Jim Heid's diagram.  The kind of  local in the neighborhood projects my grad student friend was describing belong in the lower left quadrant of Jim's diagram, the Small and Incremental/Entrepreneurial and Bootstrapped territory.  Ownership of real estate by a REIT belongs up in the Corporate and Institutional/Large and Master Planned upper right quadrant.  We might want to bring established tried and true tools scaled for the upper right quadrant to bear on projects in the lower left, but often the scale is just...off.  I think we can call that a Quadrant Foul.

Rethinking the development business model for Small Developers will continues to uncover habits that may serve folks doing large project well that need to be substantially retooled to work in small projects, or they may just need to be set aside as because they are not fit to the purpose.

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In most places the demand is large and the supply is pretty damned small.  So just how large is the demand?  If we were able to wave a wand and redirect the entire US housing industry to deliver only new rental housing in walkable urban places tomorrow, we would not catch up with the demand until 2050

If you understand urban places and have the ability to produce modest buildings for a living, I encourage you to figure out how to build apartment buildings and mixed use buildings, rent them out and and hold onto them. You should look for opportunities to do this in walkable or even marginally walkable places.  Avoid completely car dependent locations so you don't have to build swimming pools nobody uses.

If you are a contractor, I think this might work out better than building for other people.  If you are an Architect or urban designer I think this will work out better than performing fee for service design or consulting work.

If this seems like a crazy idea, please read Arthur C. Nelson's book Reshaping Metropolitan America and give it a a little more consideration.

http://www.islandpress.org/book/reshaping-metropolitan-america

Here is a link to Dr. Nelson's entire data set (in excel file format).

https://www.dropbox.com/s/3fzf8e8l89o1w0b/9781610910194_reshapeamericadatabase.xls?dl=0

Go ahead and download it and poke around.  At a minimum, cruising through the spreadsheet will make you want to read the book, where Dr. Nelson very helpfully explains what all this data means. I suspect that if you are half as geeky about this stuff as I am, you will hone in on the place where you live to see what the housing future holds for a place you care about.

 You can look up your Metropolitan Statistical Area (MSA) and find out what the annual demand for new rental apartments will be in your backyard.  Then hop over to the US Census website to look at how many multifamily building permits were issued in your county in 2014 and 2015.  

http://censtats.census.gov/bldg/bldgprmt.shtml

For example, I live in Albuquerque.  In the Albuquerque/Bernalillo County MSA, the annual demand for new rental units, according to Dr. Nelson is 4,000 units.  Imagine that a quarter of those units get delivered by the apartment fairy in the form of converted single family houses and the demand number comes down to 3,000 units.

In 2014 there were 400 units built in Bernalillo County, so the short fall of 2,600 would roll over into 2015.  Add the conservative number of 3,000 units for 2015 and that comes to a demand for 5,600 new rental units.  I check in on the permit activity for the City of Albuquerque and the number for the city (admittedly not the entire MSA) for 2015 was 570.  So now the demand for 2016 is something over 8,000.    Vacancy for apartments in Albuquerque over the last couple years has been less than 2% (--about what you would see when apartments need to be repainted and re-carpeted between tenants)  Rents have gone up 5-10% a year in this market with the higher rents in the walkable parts of town.

Is your area any different?  Do you see an opportunity?