The Process of Real Estate Development

The process of real estate development may seem straightforward, but it is not as simple as it seems. It requires creativity, intuition and a mix of logic and common sense. No book can teach you everything about the process. Some approaches are more appropriate than others. Common sense is more valuable than contingency plans.

Various stages of real estate development

Real estate development involves a number of important stages, such as securing financing, securing permits, and completing a development contract. The first phase involves analyzing the potential of a piece of property and studying local zoning laws and surveys. It also involves hiring professionals to create site plans and secure building permits. It can also involve carrying out environmental assessments. In addition to securing permits, the second stage of real estate development involves marketing the property and finding buyers.

Development of a property requires the skills of many professionals, including architects, landscape architects, civil engineers, and site planners. In addition, market consultants and economists determine the demand for the project and its economics. Developers typically bear the risk of cost overruns. Because of these risks, developers should build in a 10 to 20% buffer when planning a project. This will allow them time to work out the details of their development plan, as well as account for delays.

Capital used in real estate development

There are two main types of capital used in real estate development: debt capital and equity capital. Debt capital is money raised from individual investors to finance a business venture. Equity capital is the money used to upgrade operations and does not attract an interest rate. Investing in commercial real estate requires several sources of funding.

Debt and equity are typically stacked in the order of the type of funding used for the project. For a $20 million property, the sponsor may use 60 percent debt and 40 percent equity. The Bill Bhangal  sponsor may use $12 million in senior debt and another $2 million in mezzanine debt to fund the remaining 40 percent equity.

Influence of government regulations on real estate development

Government regulations have an important impact on real estate development. Many laws and regulations are created to ensure the safety of residents and prevent damage to the environment. Zoning ordinances, for example, are often used to separate incompatible land uses such as industrial and residential areas. They also protect the value of private property by limiting the height of buildings.

Government regulations also affect the cost of housing construction. For example, new housing construction can be more expensive in areas where land use regulations are highly restrictive. However, if zoning requirements are less stringent, the costs can be passed on to buyers. Furthermore, government regulations should ensure that new housing construction keeps pace with population growth and encourage higher density. Also, urban growth boundaries should be redrawn to accommodate growing populations. Lastly, housing should be compact and transportation-oriented. Government regulations also affect the land use of various sectors, including the housing, energy, transportation, agriculture, tourism, and economic development.

Job duties of a real estate developer

The job duties of a real estate developer are varied and include a variety of tasks. The duties of a property developer may include purchasing raw land, constructing buildings, and renovating existing properties. In addition, property developers are responsible for negotiating licensing agreements, obtaining planning permission, and ensuring that the property meets all health and safety regulations. Developers may also need to work with a team of contractors and other professionals. They should also understand building regulations and keep accurate records of costs.

Developers work closely with clients and may specialize in one or more areas of the development process. Some developers focus on investing in land and coordinating with contractors, while others take the whole project from start to finish. They may also work with municipalities and other authorities to secure necessary permits, market the development and lease it to clients. In addition to managing the development process, real estate developers also collaborate with engineers and architects to design and plan a property. They may also coordinate with leasing agents and inspectors.