Crash Course in Test Fitting

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Its About Solving the Deals

 

In this blog post I will attempt to give readers a crash-course in test fitting. We will use our software, TestFit (fitting name, no?) to show many of the concepts, along with some meaningful graphics to explain deal concepts. If you already know why we test fit, you can skip ahead to the TestFit crash course.

One side note: The audience for this post is students interested in using TestFit for coursework or real estate development competitions. Experienced architects and developers might not learn too much, other than the basics of our software.

Why do we do test fits? The answer lies in how complicated it is to create viable real estate deals. Real estate deals, in the mind of this author, boil down to five sub-problems:

  1. Design – How is the product designed?
  2. Capital – How is the deal structured? 
  3. Land – Where is the building, and shape of the land it is on?
  4. Construction – How will it be built, and what will it cost?
  5. Zoning – Does the design conform, or will it need additional entitlements?

Capital, Construction, and Zoning

 
Capital, construction, and zoning generally start out on a pretty solid set of facts: LPs and GPs want to achieve a solid YoC (normally 6.5%), GCs simply execute on construction documentation while meticulously keeping track of cost. Zoning is generally known, and operates under various land use controls like DU/AC, FAR, Height, and Lot (or building) coverage.

Some Definitions:

  • LPs: Limited Partners, often the equity component of a real estate deal
  • GPs: General Partners, who are normally referred to as “Developers” in the USA. 
  • GCs: General Contractors, the companies that get buildings constructed
  • YoC: The ratio of money made in the first 12 months to total cap ex
  • Cap Ex: Capital Expenditure, the money spent by companies on physical assets
  • FAR or Floor Area Ratio: the ratio of built floor area to the land it sits on (see image below)
  • Lot Coverage: the percentage of the lot covered by building
  • DU/AC: Dwelling units per acre
  • Acre: 43,560 square feet, or 1 Chain*1 Furlong (the area an ox team can plow in one go)
FAR: Floor Area Ratio - what is the total building area compared

Land

Land is a pretty simple concept. It and its fixtures are static, unmoving, and permanent. The only asset class that is said to be “real” hence the term “real estate”. Land gets a bit complicated with assemblages, but in general its analysis is limited to who owns it now, what kind of soils are on it, what kind of zoning is attached to it, what kind of private covenants are associated with it (hello Houston), and how bad is its topography.

Some Definitions:

  • Assemblage: Putting together several parcels to make a new, more valuable parcel (see below)
  • Private Covenant: Zoning, but without government intervention (Some private covenants can and have been ruled unconstitutional, however)
  • Fixture: Anything attached to the land. If you have to hire someone to move or demolish it, its a fixture.
  • Topography: The slope of a site, and how extreme that slope is

Solving the Subjective Design Component

Now into the meat and potatoes of what we are best at here at TestFit Inc: Solving the spatial layout. The main problem with building design is that there are no “right” answers. The solution space is as large as the universe itself. At TestFit we simplify buildings down to component parts to constrain the solution space from infinity to only a few trillion possible solutions.
 
 

The Major Components of the Design of a Housing Deal

Depending upon the land, zoning, capital and construction, the makeup of the following list will change drastically on a percentage basis.
 
  • Dwelling units – housing for people and family
  • Parking facility – housing for cars (we build a lot of this in the US)
  • Human circulation – corridors, stairs, and lifts for getting to units
  • Car circulation – roads for moving cars around
  • Leasing and amenities – space to convince people to rent

The table below gives some comps between building types and their respective component percentages. In a world where a YoC of 6.5% is desired, increasing the area of units versus all other spaces becomes quite important. This is actually an industry metric: Building Efficiency. Building efficiency is most often used without the parking facility.

320 Units @ 875 SF Avg
Space TypeWrap DealPodium DealGarden Deal
Units56.1%59.3%60.9%
Parking Facility30.7%29.6%29.2%
Corridors10.2%7.9%7.5%
Stairs + Lifts1.6%1.8%0.9%
Leasing + Amenity1.0%1.0%1.1%
Other0.4%0.4%0.4%

Some Definitions:

  • Wrap Deal: Parking facility is wrapped with housing units.
  • Podium Deal: The housing units sit atop the parking facility.
  • Garden Deal: The housing is individual buildings, surface parked.
  • Building Efficiency: The percentage of the building that is rentable.
Building Efficiency" what is the total area compared to the usable or rentable area?

Using TestFit to Solve Deal Design

Now we transition to the more practical part of this blog post: how to use our software to solve deal design. TestFit supports some construction, capital, and zoning problems, but only at the highest level. It’s main focus is using algorithms to allocate net rentable area on a plan, and to create a vision for what a project could  be.
 
The following series of videos give an overview of how TestFit works. 
 

Working With Presets

The building types mentioned above are easily wielded within TestFit’s configurator by using our default presets. This ~9 minute video will give a good overview of those presets and building types. 

Working With Sites

Within TestFit we use sites to define the land area. Sites also have some other interesting properties, like setbacks. The following video will give an overview of sites.

Understand Density with Sites, Schemes, and Presets

The cross product of the last two videos is how sites (land) and (building design) presets work together to show what density is possible with different combinations of the two.

Using the Zoning and Building Inputs

Now that you have a handle on sites and presets, let’s take a look at zoning parameters and how to get into the weeds via building inputs.

These few tutorials are just the beginning on how to solve or even optimize real estate deals using TestFit. If you would like to learn more via tutorials, please check out our Knowledge Base. Not yet using TestFit? Sign up to try it now.

Concluding Remarks

I hope this post was informative on why we design different shapes and styles of buildings. With tools like TestFit, anyone can now site plan buildings. It is a democratization tool. That being said, it takes several years to fully understand the true nature of buildings, and for users to get an intuitive sense of how they should solve a deal–but it takes decades without technology to have that same sense.

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