The Basic Real Estate Development Process

When it comes to real estate development, there are a lot of different aspects of the business one can delve into. In the broadest terms, it refers to anything involving land and the construction or renovation of structures. And developers are the ones who serve as coordinators and overall head of the project.



While the work of developing real estate can be complex and daunting, it the whole process may be simplified into a basic model.

One way to look at it is that development involves scoping the market for properties with potential, purchasing the lot, developing the area or structure and selling it at a profit.

While a lot of work also goes into looking for that perfect property and finding a buyer, real estate development is mostly about the rehabilitation or reconstruction of houses or buildings.

You can go through the process by starting immediately with the purchase.

Once you have a piece of land or a house or an old building you would want to improve and sell for a higher price, you should start creating a plan.

What exactly are you envisioning for the place? If it’s a piece of land, are you aiming for a residential or commercial building? Will it be a stand-alone house or a row of townhouses?

real estate developmentThere are a lot of possibilities but you should be choosing the one that would allow you to reap the greatest rewards. Many factors come into play when it comes to real estate development. You should consider the area. If it’s a commercial area, it won’t be a good idea to build a house. Perhaps an apartment complex would be better with the first floor reserved for shops. This will raise the value of the property because it could be rented by a large number of people and not just one family or one shop. The same rule applies when renovating a house. Will the renovations increase the property’s value?

The next step after finalizing the real estate development plan is getting your team together to start the construction.

Yes, as a developer you need a team. If you are just a small developer, you just need a handful of people to help you coordinate and lead different aspects of the work. You should have a broker or property specialists who will help you find properties and sellers, as well as estimate the value of your developed property.

Next is your contractor who will lead the day-to-day operations of the renovation or construction of your property. But while everything should be left to his capable hands – it is assumed that you hire someone who is experienced and trustworthy – a developer should from time to time monitor the daily construction work.

In real estate development, being hands-on is a good thing. It enables you to ensure that everything is going as scheduled and the quality of the renovation or construction is at par with your standards.

The construction process may vary, depending on the work needed to be done. It could be as easy as repairing and refurbishing an old home, most likely foreclosed or mortgaged. Or it could be as challenging as replacing parts of a house or installing major features such as a pool or a second floor.

Just make sure that you have the necessary papers and that the rehabilitation is within budget.

At this point, a developer should be regularly computing the costs of the renovation and check if there is still room for a good profit. Know when and how to adjust. There are times in real estate development where the plan cannot be followed completely. When that happens, you either have to stop and make do with what you have already because of a shortage in the budget or you can push through with an alternative and cheaper plan.

Eventually, you will have to be knowledgeable and well-versed in construction. You will have to make decisions as to what kinds of materials should be used and what particular features would help you raise the value of the property.

Renovation and real estate development may last for months. Keep the timeframe as short as possible since you would most likely want to be able to sell as soon as possible. That is, after all the purpose of house flipping. Extending the days of your operations will only result in added costs and erode your potential profits.

Once the real estate development is finished, you can start advertising your property. You can do it yourself through advertisements posted in news paper, buy and sell magazines or websites. Or you can tap a broker or property specialist to help you find a perfect buyer. Remember also that there are different buyers – some looking for their dream home, others looking for a good investment. Learn what kind of customer your property caters to and brainstorm how you can reach your perfect buyer.

Related:  Components of Real Estate Development