Real Estate Development Explained Easily

Many people familiar with the real estate market and industry are very familiar with the term “real estate developer,” and perhaps can even name a few famous ones, from Donald Trump to Alfred Taubman.  It would seem that the term itself is very self-explanatory, as real estate developer simply develops or improves real estate. 

In reality, the entire concept of realtor development is of course much more complicated than that.  Unlike someone that purchase a home to fix it up and resell it, a large-scale or high-end real estate developer often deals in millions or even billions of dollars in investment.

It’s true that a developer may be an individual, but more likely will be a partnership or Limited Liability Company, or even a corporation.

There are two major categories of real estate development activity:  land development and building development (also known as project development).

Land developers usually purchase land that is unimproved, meaning that it has yet to have utility connections, roads, any type of grading, and so on.  Unimproved means just that, in every case.

Developers then step in and define the “covenants,” which are the context of any future builds and improvements on the land.  They also gain “entitlements,” which are legal permissions or permits in order to go ahead with their development plans.  Once these covenants and entitlements are in place, the land development can then begin, with earth grading and other land leveling, utility connections, and zoning.  Roads are also planned, built, and paved, whether for large cities or just neighborhoods.

Once the land is properly developed, building developers may then step in.

These building developers then have buildings, whether offices, retail, or private homes, planned and built on the land. 

Building developers and land developers obviously need to work very closely, as the building developers plans will need to be accommodated by the land developers.  For example, the utilities brought in for office buildings are obviously different than those for private homes, as are roads, and everything else.

 Some building developers also purchase existing buildings or properties for the purpose of upgrading, remodeling, razing and rebuilding, or otherwise improving whether for sale, or to keep as assets to produce cash flow via rents and other means.

Why develop real estate?

When you really think about it, you realize the great amount of work and obvious risk that is involved in real estate development.  Additionally, homes or estates cost a lot of money to purchase and develop (sometimes called “hard costs”), and can sometimes be difficult to sell.  Because of these high expenses and difficult sales, and because the return on investment often takes some time, this explains the risk in ownership and development. 

So then why choose this as an occupation?  One thing to remember is that most real estate development projects are financed with debt leverage, that is, with borrowed funds the proceeds of which are assumed to earn a greater rate of return than the cost of interest.

By using debt leverage rather than personal investment, this cuts the risk tremendously.

How do you actually get wealthy?

And of course for most, the real question is how one actually gets wealthy from home developments if the work is so hard and the risk is so high.

The answer is of course complicated, and certainly there is nothing guaranteed.  Many developers have lost as much as they have gained, and the market fluctuates greatly.  However, it seems that those who are smart about their investments and developments are the ones that are successful.  After all, the entire point of real estate development is much like stock trading – you want to sell the product for more than you paid for it.

Having a true understanding of what makes real estate valuable is key.  Make a good decision as to location, upgrades, and the like, and you’re sure to make money.  Make bad decisions, and you’ll lose money.

To actually get wealthly then, it pays to do your homework as they say.  Purchasing land or buildings on the low end is good, but just because something is affordable doesn’t mean it’s going to turn a profit once it’s developed.  There may be a reason why certain areas are undeveloped or certain buildings are up for sale.

Quite often, when people begin to invest in commercial real estate, they begin small.  They may acquire a single family dwelling, a duplex or maybe even a small apartment building.  In order to keep continue the commercial investment game; you have to keep moving property.  In fact, if you do not grow, you will eventually find that your bank can no longer help you because you have maxed out your investment portfolio.  Taking too long to develop can be a death sentence in the game.

Additionally, staying on top of trends in the real estate market is also crucial.  Population shifts can greatly affect the outcome of a development project.  When the populace is moving out, it makes no sense to develop new property or refurbish old ones – who will buy the property is everyone is moving away?  And, who will buy your developed land if all builders are unable to sell their current properties and are looking at other areas?  Sun Tzu, author of “The Art of War,” said, “By taking into account the unfavorable factors, he [the soldier] may avoid possible disasters.”  This point can obviously apply to real estate development and eventual sales.  Being wise about potential problems with any one area or development deal can help avert monetary disaster.

To actually get wealthy from real estate development, it takes some skill and effort to stay ahead of the game, and the ability to organize all the steps needed, as well as to delay profits.  However, with a bit of work and study, it can pay off.  Development has long proven to be one of the most profitable areas of business that’s around – if you have the patience to play the game right.

Real Estate Development – Two Essential Keys to Building a Successful Property Development Business!

When it comes to real estate investing very few investors actually look at building their property portfolios as a real business. They need a shift in their way of thinking and to approach real estate investing more like an entrepreneur.

In our opinion two of the essential keys to running a successful Real Estate Development business are using great systems and forming great long term relationships.

Entrepreneurs use proven systems and leverage off others to run their business effectively and they view their business as separate from them. They realize that they are not their business and see their business as the end product. A property developer who understands that, has a real opportunity to become very successful.

When you realise that real estate development is a business and that your business is your product, you can then start to work on building your business. To build a successful real estate development business you will need to change the way you think and your approach to real estate investing.

We believe that the ultimate real estate developer is what we call a ‘Real Estate Development (RED) armchair entrepreneur’. You see, the traditional property developer still thinks that real estate development is a job. They believe that time equals work and work equals money, whereas a RED armchair entreprenuer believes that time equals equity and equity equals freedom. In other words if RED armchair entreprenuers spends the time to build equity it will allow them to get free of the business and if they want more freedom they build more equity.

Traditional real estate developers still believe that they need to do the work and be part of the system whereas RED armchair entreprenuers believe that they should build great relationships and have others do the work. This enables RED armchair entrepreneurs to build their businesses much faster.

When the business owner is also the hands on developer it will usually require much more hard work to make the business successful. It is much smarter for anyone considering entering into the industry to set up a business where the systems run the business, and let others run the systems. In other words the systems and other people work for you so you don’t have to.

Working on your business allows you to work on the things that really matter and that will give you the biggest return for your efforts. RED armchair entrepreneurs use systems to streamline tasks and avoid chaos so they can concentrate on growing their business efficiently.

When the systems are being run by others RED armchair entrepreneurs are able to focus their attention on innovation. They can capitalize moments of inspiration and through effective communication they’re able to turn their dreams into reality.

If you think about some of the great property developers, names like Donald Trump will typically come to mind however one of the biggest property developers was actually a school drop-out, Ray Kroc the founder of McDonalds. An entrepreneur with an incredible vision who worked on his business and not in his business.

You see Ray never considered that he was in the hamburger business but rather that he was in the business of real estate. Ray secured development sites in great locations, put fast food restaurants on them which he franchised. Ray Kroc died on January 14, 1984 and was worth an estimated $500 million.

YOUR ULTIMATE GOAL

As business owners and proud parents our most important asset is time and as much as we wanted to be actively involved in real estate development we knew we didn’t want to be traditional real estate developers who worked long hours trading their time for money.

Instead we looked at the big picture and applied the same entrepreneurial skills we had developed in our architectural practice to property development. Real estate development had to contribute to our ultimate goal of achieving financial freedom and giving back.

We knew that when we achieved our ultimate goal it would give us more choices so we could start to live our dream lifestyle according to our core values and with passion and purpose.

To be successful at real estate development you need to connect with what is most important to you. As soon as you start thinking more like a RED armchair entrepreneur and set your ultimate goal or the dream that drives everything you do the more real estate development will give you a sense of direction and purpose.

Your ultimate goal will make you want to jump out of bed in the morning and stay up late, it is your innermost driving force. It will allow you to live your life intentionally, rather than randomly and it will motivate you to achieve your full potential.

Setting your ultimate goal has nothing to do with real estate development. It is about how you want your life to be like.

It isn’t about material things, or about others. There is no right or wrong answer because it will be different for everyone. It is about your life so it is, in essence, what is true for you. Real estate development is only a vehicle that can be used to support your ultimate goal.

To set your ultimate goal, you should start off by asking yourself questions such as:

* What do I need in my life?

* What do I want in my life?

* How do I want to live my life today?

* How do I want to live my life in 2, 10 or 20 years from now?

* What has given me great joy so far in my life?

* If I had a magic wand and my life could be anything I wanted it to be, what would that life be like?

Knowing your ultimate goal gives you the ability to make conscious choices that are consistent with what is important to you, your core values. It will help you set your life’s purpose and put real estate development in its proper perspective.

Why to Consider Apartments For Rent – Read This Article!

As compared to purchasing a home, apartments for rent is always one of the best options and easy. So the moment you rent any apartment you certainly can enjoy a number of benefits. So in case anything every goes wrong with the property you just have to try and contact the property owner. If you are staying in a rented apartment then you just don’t have to maintain the lawn or even pay for the maintenance of the house. You just have to pay a single monthly rent check and all your problems are sorted out. In case there is any leakage then you just have to call up the property owner. One main advantage of selecting apartments for rent is that you may never have to pay separate check for each and every house bill.

Believe it or not, the moment you plan to stay in a rented apartment you are sure that you might never have to pay much money. Renting apartment is in fact very much cheaper as compared to purchasing a home. In case you have to stay in a metropolitan city then the cost of renting apartment is much cheaper as compared to purchasing it. So if you need to rent apartment then you can also go and rent a condo at a very reasonable cost. Another advantage of selecting Apartments for Rent is that if you feel that you are just not happy by the place then you can always change it or select another place to stay. But in case you purchase a home then it might not be possible for you to sell it every time you are not satisfied by it.

You also never have to pay thousands of dollars to the estate agent as down payment or big monthly installment. You also never have to worry about paying for building inspections or the tax cover and insurance coverage. Another advantage is that you might never have to pay huge mortgage amounts or interest rates when renting apartments. You can also select apartment that fits your budget and your likes and then rent the place. Even if purchasing a home can offer you with tax break still you might not be able to make use of this offer every time or in most cases. There certainly are not many benefits that you might get when purchasing a home. But there certainly are a number of benefits that you can get when renting apartment. In case you are selecting Apartments for Rent you can still get a number of tax benefits. If you are paying big amount of rent then you get a bigger relief in your taxable amount. So the moment you plan to rent apartment you can always get a number of flexibilities.