3 Methods to Real Estate Development


Real estate investing model

The real estate development business is also known as property development. It’s a line of business that covers a whole range of activities from the renovation of properties to leasing them out or purchasing and selling land. Although real estate development is not lumped into construction many times the same real estate development companies will oversee the construction process on their piece of real estate.

Typically a real estate development company will buy a piece of land. After this they finance the real estate deals and have builders orchestrate the development process. It can be a risky endeavor to create or renovate real estate but it can also have the best rewards, depending on the outcome. A developer does a lot. They are involved from the start of the purchase of the property and then they determine the type of marketing to be used, develop the building design, procure necessary approval, licensing and financing, oversee the building process and then finally either rent, manage or sell it. Having said that, not all developers will be involved in all of these steps. Some develops prefer to outsource different parts to experts in that particular field. The great thing about being a developer or working with one is that they have a lot of connections with different people in the field such as architects, engineers, city planners, inspectors and surveyors, leasing agents, lending companies and more.

When you are talking real estate development strategies, there is no right or wrong answer. There is not a definite, tried and true way to go about it. There are various different strategies that can be considered depending on the various factors. However, there are three strategies that can be taken to the bank when it comes to real estate development that many successful investors use.

Buy Foreclosures
Buying a foreclosed property or one is pre foreclosure or short sale will ensure you get the real estate for about 20 percent less than market value. Banks will host scheduled foreclosure auctions, you just need to find out when they are. Other than that, you can find foreclosure listings in the classified ads as well as contacting brokerages that specialize in selling foreclosed properties. However, if you do this last option, make sure there is nothing wrong with the documents for signing.

Buy a Fixer Upper
A good method is to buy a property either under or at market value that has some potential to increase its value. The only downfall with this method is that you are in a time crunch from the time that you purchase the property. The upgrades will need to be done within six months in order for the investment to be worth it. These upgrades will need to up the value by at least 20 percent.

Buy and Flip
This is a long term investment strategy where the investor buys a property and then waits for its value to increase on the market. A lot of investors are not in to this method because it is usually based on speculation and opinion rather than solid fact so it can be risky. However, if a town looks like it’s on the up then an investor may buy a property there hoping that within about five years the demand the places in that area will increase so the market value will rise. This is known as ‘flipping properties.’ If a property flipper gets really good, he or she can actually sell the property before doing the renovations by making a deal with the owner and potential buyer.

Real estate investment is not always an easy road. However, it can be very satisfying if you know what you are doing and knowing that the work you will do will positively affect you and your buyer for many years. Consider the types of businesses that will move in or the families that will enjoy your homes or the kids that will have fun in parks and play areas that you helped build. Buying an empty lot could leave you with a whole lot of options and ideas for what could be built, you just have to know which one of those ideas is going to bring you a profit.

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