Most of the millionaires (77%) in the U.S. own real estate. They may own residential rentals, commercial properties or properties that need development. Developers understand the incredible potential for income and profits, which are often greater than other forms of real estate ownership. However, the development process takes time. This is what you should know about the property development process.
Real Estate Development Defined
Professionals like Angelo Ingrassia real estate developer purchase raw land or properties with existing buildings with the purpose of improving it. This process involves either building new structures or upgrading and modifying existing structures on the property. The goal of these individuals should include increasing the value of the property. These professionals then resell or retail and rent out the properties they develop.
Professional developers may have degrees, including urban planning, business, real estate and civil engineering, but they don’t have to have a four-year degree to be successful. They often have experience in the field, eighter through working for a development or real estate company or a financing company. All successful professionals conduct extensive research and build knowledgeable teams to help them through the process.
Before Development Begins
The real estate development process begins with researching the market, neighborhoods and community. These professionals also secure their financing. They may have co-investors or work with financial institutions. Few investors actually purchase these properties outright with cash. Instead, they leverage the value of the real estate and its potential to gain their financing.
Then, these professionals begin searching for a potential property. They have key characteristics they look for. Some specialize in developing raw land while others search for renovation opportunities.
They also have specific locations and amenities they seek during this process. Successful individuals have an eye for properties that have significant potential value increases. Then, they research the property, including its zoning restrictions, cost analyses, etc. They work with architects, engineers and construction companies on their builds.
When Construction Begins
Developers’ work does not end when construction begins. In fact, they need to make sure their construction company follows government regulations. They have to watch for code violations and monitor the budget and schedule. They also pay for supplies and labor throughout the process.
In most cases, the developer made all the major decisions about the property during the pre-construction process. However, these professionals may need to decide on small things like fixtures, lighting, flooring and paint colors.
When Construction Ends
When developers complete their updates and building, these professionals work with real estate agents and/or property managers. They may lease the space or sell it. Selling it can pay off the loan or refund and pay investors as well as provide a profit, ideally.
Leasing creates a regular monthly income, but the payback period is much longer. If a property manager gets involved, the monthly income drops, but the developer can move on to the next project without taking time to find tenants, do maintenance, fix tenant problems, etc. Ideally, these professionals have tenants ready while the building is under construction.
Real estate development is a lengthy, involved process, but its rewards can be great.