Real estate development

Real Estate Development involves the purchase of land for the purpose of improvement. It is a project involving a lot of financing, contractors, architects, engineers and sales agents. The estate developer is usually an entrepreneur who takes all the risks involved with getting an investor to finance the project, with the ‘hope’ of getting a high Return on Investment. It is noteworthy that Real Estate contracts are very risky due to the span of time involved in its purchase and completion. However, it is a very profitable career option and one major point to bear in mind is that,   real estate designs must be innovative which will help in the sale as soon a project is completed.

Types of Real Estate Development

The Greenfield Project

These are usually areas left with greens, either used for agricultural purposes or never been developed. Examples are open fields and locked-off properties. Some merits of developing such properties involve the ability to decide on any use the developer so desires and the environmental conditions to develop them are usually conducive and easier to comply with. Its demerits include the high amount of cost associated with developing a new property from scratch and government planning permissions which are likely to take a longer period of time.

The Residential Project

Generally, these properties are used for inhabitance purposes. An obvious upside of this project type is that everyone needs a home at some point in their lives. Furthermore, the Real Estate market revolves round residential properties more often, giving developers an inflation advantage in addition to the quick sale of most residential outlets. There are no major drawbacks here asides the fact that developers will need to exercise great due diligence (such as carrying out surveys to understand people’s need per time) in picking a suitable area for development so as not to stall its sale after completion.

The Industrial Project

Most industrial fallow lands are those which have been used for production purposes in the past. The main benefit of developing such is the low cost that accompanies its development while the undeniable downside is that the cost boycotted during purchase and construction may be needed for clean-up. Likewise, the project may be slow paced as clients in need of such development need to be available to dictate most parts of the project.

Commercial Project

Commercial projects are developed solely for the purpose of making profit. This may be in form of a mall, office suites or residential homes. It is normally owned by the developer for to fulfill business needs and Return on Investment. The main reason why this type of project is attractive is due to the assurance that once it’s completed, it will continue to generate consistent cash flow which results in having a long term capital appreciation. Some developers have found that managing such properties is a bigger concern because leasing out will require constant communication and involvement with various people hence there must be a working plan with regards to managing the completed properties.

The Brownfield

The brownfield is used to describe land areas which have been previously used and probably abandoned for various reasons. Few benefit of this includes low project costs because of the previous infrastructure on the property, fast licenses received from the government because the improvement will be seen as viable as there is no need to start from scratch. Some of the drawbacks that arise with this type of Real Estate Development include the possibility of encountering operational difficulties especially with regards to the location of the land or property, as most brownfields are situated near residential areas or far away in the inner parts of the city where there may be many constraints with transportation to arrive at the sties as and when necessary.

What are the risks involved in Real Estate Development Projects?

Risks inherent in Real Estate Development come with its three stages; the start-up, the construction and the final stage.

  1. Real Estate projects are laced with many ‘unknowns’, especially at the inception of the project. To combat this, most developers source for funds themselves without getting many interested investors at such periods.
  2. At the construction level, the risks are minimal. However, it is not totally ousted because, until a certificate of occupancy has been received, the construction is not seen as valid and at this stage, all workers contracted for the project must be professionals who will deliver innovative designs as there is no benefit in duplicating projects already done by others.
  3. Once a project is complete, the risk involved is not as pronounced, except ‘the how’ of generating quick sale and/or rental. Gathering from the benefits involved in the different project types, the speed of sales and rental depends on many factors such as the ‘needs’ such projects meet.

Real Estate Developers (Career Path)

Apart from studying (BSC. M.Sc. and/or MBA) Real Estate Development in teaching institutions, many developers do not have a formal education specifically in the field. A lot start as Real Estate sales agent, take interest and get established after gathering some experience and funds. Others start as contractors or site workers who got the inclination on the various benefits of working as a developer. In a nutshell, experience working with a developer helps far better than only studying the Real Estate course in an educational environment.




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Published on 19th June 2017

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