Design Bid Build to Direct Capitalization

 

Design Bid Build

Also called the Design-Tender approach, the design-bid-build (D/B/B) method is a popular method for completing real estate development and construction projects, especially when there are separate entities involved in different aspects of the project. During the first stage (design) of the D/B/B process, the property owner usually hires an architect to design the property, and the architect may bring in engineers and specialist architects to finalize the plan. In the second stage (bid), the developer or general contractor will solicit bids (tenders) from qualified contractors and subcontractors for different parts of the project. Once the bids are confirmed and clarified, the owner and general contractor then decide which bids to accept, as they proceed to the third stage (build). During the construction stage, the architect may return as the owner’s agent to review the work and issue site instructions to or with the general contractor.

Design & Build

The Design & Build (D/B) approach is a real estate development or construction method in which one company or party designs and constructs the proposed project. Neither the design nor general contract responsibilities are outsourced. The D/B method may still use sub-contractors for some elements of the project, but the design and construction management are all done in-house.

Design Development

The design development stage is an important phase and process in a real estate development project. During this stage, the architect completes the plans and specifications for the proposed development. This stage usually begins after the architect’s initial schematic design has been approved by the developer.

Designated Agent

In the real estate market, the salespeople who work for a broker and are authorized to act as agent for a seller or buyer as designated by the broker.

Desk Review

The desk review is a type of property appraisal review, which is limited to an in-office verification of the appraisal report. The reviewer checks the data and conclusions in the report to ensure that they are accurate.

Detached Garage

Commonly found with urban and older homes, detached garages are not directly attached to the home. Many were offshoots or renovations of old coach houses, in which coaches and horses were kept. Modern homes attach garages to the side of the home or incorporate it directly into the building shell for added convenience.

Detention Basin

Typically situated next to rivers, lakes and other bodies of water, the detention basin is a pond or ditch used to prevent flooding and downstream water by holding water (usually from rainstorms) so that the river, lake or bay is not immediately inundated. Although most detention basins are dry, some are wet ponds designed to hold water on a long-term basis. Compare with the Infiltration Basin and Retention Basin entry.

Deteriorating Area

In real estate, a deteriorating area is a community or neighborhood whose properties display marked neglect, disrepair and subsequent decrease in relative demand.

Determinable Fee

See the Fee Simple Defeasible entry.

Developer

In real estate, the developer is an individual or entity who undertakes the transformation of undeveloped or underdeveloped land into an improved property.

Development

In real estate, development refers to the improvement of a property. Development may entail everything from subdividing large plats, creating infrastructure improvements and constructing the buildings.

Development Contract

The development contract is an agreement by which a developer agrees to construct a particular improvement and the client agrees to purchase the improvement and (normally) property upon completion.

Development Loan

In real estate investing, the development loan provides funds used for infrastructure improvements (building of streets or utilities, etc.) and to make property suitable for sale or construction.

Development Plan

See the Master Plan entry.

Devise

The legal term devise refers to the act of conveying title to a property through a will. Compare with the Bequest, Will and Testate entries.

Divisible Contract

The divisible contract is a dividable agreement, which contains separate, independent agreements. The separate elements will not invalidate each other, if one of the agreements is found to be void or unenforceable.

Dike

See the Levee entry.

Dimension Lumber

The term dimension lumber refers to a standardized type of load-supporting lumber used for most construction as girders, joists, planks, posts, rafters and studs. Dimension lumber is typically 2″ to 5″ thick and up to 12″ wide.

Dimension Plan

The dimension plan is a floor plan that does not have the detail of a blueprint but rather shows the scale layout of the building or project.

Diminishing Return

The investment term diminishing return refers to the relationship between the cost of an investment or improvement and the value it adds, in which the value increases less than the amount of the investment.

Diminishing Returns

See the Law of Diminishing Returns entry.

Dingbat Buildings

The Dingbat is slang for a shoebox style of architecture emerged in Florida and Southwestern U.S. during 1960s. The typical Dingbat apartment building was a box-like two- or three-story apartment building with street-facing parking directly underneath the building or beneath overhangs. Most Dingbats had a very minimalist design, with few ornamentation, decorations or adornments, but were cheaper to build.

Direct Capitalization

The direct capitalization method is a way to estimate the value of a property or investment, based on its net operating income (NOI) and the commonly accepted capitalization rate for that type of investment.  For example, an apartment building generates $200,000 in net operating income. Assuming a 10% cap rate, that property would have an estimated value of $2 million ($200k / 0.10). By comparison, the appraisal report takes a more detailed approach that looks at area comparable values and the property’s quality.