In this article, I will share the exact process of real estate development as simply as possible. Because a lot of people think the land development process is very complicated and takes a lot of time and effort to develop a big building.
But that might not be 100% right if you have a good strategy in place that explains everything you are about to do. That way, you will save time, money, and effort. This article is all about how to become successful in the process of real estate development.
What Is the Process of Real Estate Development
Raw land development is the process of purchasing a piece of raw land, developing a residential or commercial building, and selling it for a profit or renting it out for a rental income as a cash flow.
If you look at the world of richest real estate developers, you will see there are more than 256 real estate billionaires in the world and most are self-made, according to Hurun research.
That means if you start land development, there is every chance you will become rich in the coming 10 or 20 years. The world has proven it.
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Benefits of Land Development
Now let’s understand the benefits of a real estate development business and how to make the most out of it.
1. The Overall Competition is Low
In regular real estate investment, there are a lot of competitions, and you as a beginner will have no place in that world. But in real estate development, the competition is far low.
Because not a lot of people want to handle these kinds of hazardous work. It is very tough, and not many people will have the gut to enter this business.
2. Financing The Investment is Easy
Banks and other investors are ready to give you money to develop buildings because they know they will make money. It’s rare that investors or banks will reject you to finance the development.
On the other hand, if you are buying ready-made properties, they will look at your property thoroughly, and if they think it will bring them a good profit, they will invest. But development businesses do not have all of those. Here financing is far easier than any other investment.
3. Huge Appreciation Potential
Real estate is never going to lose its value, even in the time of a market crash. There will be always a demand for people to live and do business. The land will always appreciate in value every year, no matter what the current market condition is.
On average, a real estate property appreciates 6% to 10% annually and in 10 years, it will double its value. That is the power of appreciation in the real estate development business.
Plus, if you want, you can rent it out and earn some good money every month, as most real estate developers do. That is the primary source of their richness.
So there are tremendous appreciation opportunities in the development business. You can say it is close to a GOLD investment. Because most people think a land is a form of GOLD. Okay.
Raw Land Development Process Step by Step
So here are the ten steps you need to follow to get involved in the process of real estate development, and those are as follows.
1. Understand The Land
You must always visit the site like a traditional investment. So you may find something noticeable that is not in the paper. Like you may discover some hidden amenities, unique landscaping, accessibility issues, or even existing power hookups. All these can create huge damage if you do not verify them properly.
2. What about the Streets & Roads
Transportation is an important aspect of the land development process. You have heard this quote “Real estate is all about location and ease of life.” Make sure those streets and roads are neat and clean and have powerful transport facilities in the area.
3. What is the Situation of the Current Market
Market demand and supply can create a tremendous impact on the decision of those home buyers. If there is more demand than supply of new homes, that is the best time to develop something there. If the supply is higher, you might want to avoid that market. Analyze these two before finalizing a location.
4. Selling versus Renting
Before you start developing, select for whom you are developing. To sell all the units or rent them all, or maybe some for sale and some for rent. Choose that first because that can affect the way you develop buildings and manage your budget. Choose first and then start building.
5. Collect all the Permits
Getting all the permits is hard. There are lots of rules and regulations to follow for developing a new building in a particular area. Contact your lawyer and prepare those documents as soon as possible.
6. Local Zoning Laws
In many areas, there are some zoning laws that every developer needs to follow, or else the building will be treated like an illegal building. The government might crash that in the near future, and you will lose everything. Make sure you follow all the zoning codes in that area.
7. Building Requirements
There are some building requirements while developing a big building. Most people rely on their contractors and hand them over everything. But they will not always work as you expect them to. That is why you have to take care of all those requirements as soon as possible.
8. Water and Electrical Supplies
Water and electricity are the two most important things when people consider buying a house. Your work here is to make sure, there is not a shortage of these two at any time of the year. Do whatever you need to do and supply these two continuously.
9. Engineering Methods
This step should be the first step. Hire a good engineer, create a good plan with him, and don’t change plans often. If you do, that will cause more cost for you, and you don’t want that.
You are here for business, not to live there. Budget is the most important thing in this business. Try to plan in a way that reduces your cost.
10. Always Be Creative
And lastly, always be creative while developing. Don’t be afraid to take another way that many people think is impossible. Creativity comes from asking unbelievable questions. Ask questions, and you will see things start to appear.
Before You Start Developing
Look, the process of real estate development is not easy. Be 100% prepared before you make any move. First, create a plan of how you are going to sell. Believe in yourself and jump in. You will succeed. I wish you the best of luck. See you soon. Thanks for reading.