Business & Property

Understanding More the Risks and Challenges in Real Estate Development

In every business, there is always risk and challenge no matter how insignificant it is. Real estate development has risks and challenges. Especially because it involves multi-step process that can be complex and complicated.

A single project can take time more than what you have planned before.

It can take years to finish. Along the way, there are always obstacles whether big or small. However, lots of people choose this anyway.

Risks and challengings in real estate development

That is because real estate development is one of the most highly profitable investment. Development projects allows you as developer to create something new and fresh to be offered to the market demand.

Everything you have worked hard for will be paid off if you successfully finish your project with perfect result.

Risks and challenges in real estate development

There are many factors which can influence the level of risk you will face when handling development projects.

The type of project is the main factor.

In addition stage can also influence the intensity of the risk and obstacles you are going to face when handling a development project. Here are things you need to know about risks and challenges in development projects:

  • The risk is lower if the tenant is already identified. This mostly happens when you handle a retail built-to-suit project. When the project is already under lease, the risk is also lower. Just take example when you handle development project based on the request of already famous retail such as fast food retail. Since you have already known what the tenant want to the project, you don’t have the risk of the project to be disliked because the building is already like a uniform anyway. There is little to non-existent risk for the project to be rejected because since everything is clear.
  • The risk will be higher when you handle speculative projects. This happens when you have only few or no leasing commitments before commencing construction. You, as developer needs to figure out what the market wants and needs. You need to choose wisely about everything regarding to the development projects. This requires more research in the beginning. In this subject, the leasing risk is also higher because you don’t have already identified tenants. If you create unique project, the construction risk is also higher because there might some mistakes in small details to perfect the project.
  • In very stage of development project, there will be obstacles you need to face. In pre-development stage, the risk is considered the greatest and the most varied. That is why you need to do everything thoroughly especially on the preparation. You need to do thorough research to make sure your plan will work just find and identify some potential risks to tackle down. Compared to pre-development stage, the middle stage in which the construction begins has lower risk. Thus, you need to deal with the risks in the beginning to make the next stage of development goes smoothly. The risk in the final stage is to obtain tenants. That is the greatest challenge.

Things to research about property investment

Research is essential when it comes to property investing. Jumping blindly to property investing won’t do you good. Investing in property involves financial decision making which costly if you are not careful and thorough. Research allows you to make strategic plan based on the situation and avoid making costly mistakes. Planning and research are important part of property investing you cannot just ignore. Smart investor will gladly do their own research without being told to because they know the importance of it. However, it is also important that you know what you are going to research about.

Things to research about property investment

What you need to research for property investing

Property investing is promising business but it has also its own risks. Being brave and willing to take risk is not the only thing you can do. Bravery without calculating the risk will only put your money in the line. That is why you need to do your own research to gain reliable information and data to take actions. Research for property investing should include related topics and subject. Here are things you need to find from your research:

  • Deciding your long term goal is essential in property investing. However, it will be hard to do if you don’t know your financial position and capacity to buy a property as investment. Besides, there is always risk you need to calculate before making any financial decision. To make everything easier, you can seek advice from professional and experts. They can give you honest opinion and useful assessment. This will allow you to know the big picture of your timeframe in investing.
  • Remember that even though you do your own research, you still need others to complete it. You need reliable, solid team to help you gain reliable information and advice. You need to build your own investment team consist of financial advisor, professional accountant, broker, etc. they can help you identifying the best strategy for your investment.
  • Next thing to research is of course the market and location. You need to find investment grade property which is quite challenging. To find the right location, you will need to dig deeper about its history of capital growth, demographics matters, etc. demand factors and local supply also need to be included in your research. This subject may take the longest in the process because it is challenging to find the right location. However, it will be worth it once you find the right one.
  • Thing you need to research is the type of property you want to invest in. You need to find the one that will suit your investment strategy and goal. Make sure to find the right property at the right price in the right location. You need to consider the proximity to essential amenities as well.
  • As mentioned earlier that you need to research about the right property at the right price. Thus, you need to find out as well how much you are willing to pay for a property investment. This is important to avoid paying too much for a property.

The Roles of Property Development Manager

In handling development project, you cannot do all tasks alone. You also need to rely on others. Building a solid team to complete your property development project is important to do from the beginning.

No matter how skillful in multitasking, there is always a hole for mishap here and there. Besides, development project is more complex than a simple property investment.

In development project, you need to do many things started from finding the right property which include the best location and price, planning how to develop property to increase the value, and find the right strategy to make profit from completed development property either to sell or rent it out.

With the complexity of the task, you cannot do it all alone. Thus, you can rely more on your property development manager or project manager.

Gaining benefits from property development manager’s roles

Roles of property development manager to help you completing the project

It is important to select the right development manager who can help dedicatedly help you through the entire process of completing the project.

Good development manager have reliable traits such as technical competence, ability to oversee every aspect of project, excellent communication skills, have self-discipline, dedicated to their work, as well as patient.

So that, I think that it will be important as well to tell you about the roles of development manager you need—to help you complete the project perfectly.

Development manager is the one you can rely on about time management. Remember that time is money.

When your project delays, will result in costly consequences. Development manager will help you arrange the timelines throughout the development process. Of course, there are many factors that can make your project to be delayed out of your will and control.

One of those factors is council delay during development approval process. Another factor include bad weather which can delay construction process.

For any unjustifiable time overruns, your development manager will help you to ensure that you have a penalty clause in your building contract which compensates you.

In general, your development manager is the one who can ensure your development runs smoothly. Of course, it also your task to ensure everything goes according to plan.

However, development manager has ability to oversee all aspect of your project. Thus, it can benefit your project better.

Development manager also has role as quality assurance on your development project.

A good manager is able to conduct ongoing evaluations of all the relevant trades while working on your site.

They are there to ensure the quality at every phase of the project. They also there to ensure that the process goes according to the specifications stated on the building plan and contract.

Your development manager can also help you as coordinator to ensure everyone in your team works together harmoniously in order to make the project successful.

There are various people working in your team to complete the project.

However, you need to make sure that everyone works with the same goal. Qualified development manager will engage to the service of constant coordination.

Good development manager is able to stay objective and professional in every situation.

Options You Have to Your Completed Development Property

It takes months to finish your property development project. Started from the pre-purchase stage to the finale completion, there are many things happen. However, you will be able to breathe in relief once your project done.

Of course, it is not the end of the story. Your destination doesn’t stop once you finish your project.

There are many thing to do after the completion. Every developer has different goal when it comes to property development. Some of developers aim for high profit while others aim for long-term income.

The goal you have in the beginning of taking the project will decide of what to do once the property development completed.

What to do with your completed development property

To know exactly what to do with your completed development property, you need to ensure your goal. Of course, you may change your goal. It is not uncommon for developers to change their goal from the beginning of the project once they see the completion.

What to do with the completed development property

Here are options you can choose when you have finished your property development project:

  • First, you can sell your property to gain profit. It means that you aim for short term profit if you choose to sell your development property. The benefit you can gain from this is you can earn profit straight away. Then, the development loan can be paid off quickly. You also can move on to the next project. It means that you need to find another project to start even before your current development property is finished. Filling up your pipeline for your continuation of work is important to make sure there is no time for you to wait for another opportunities. Choosing this options, you will earn more knowledge and experiences of trading which almost every developer has. The disadvantage of this option is that you no longer have opportunities to gain more from the property once it’s sold.
  • Another option is to hold on your development property as an investment. Your completed development property can be a long-term investment if you like it that way. There are benefits from choosing this options such as higher rental yields since you can rely on rental payments from the tenants. Your market value will also get higher. It allows you to withdraw a substantial amount of your funds used for the development. This is because the bank would refinance your property once it’s completed according to its market value. The disadvantage of this option is that you will need to keep handling the development property and cannot move on to another project. It is because rental property requires dedication as well.

You can choose of what to do with your completed development property. You don’t have to follow what other developers do.

Read This: Closing the Best Deal With the Right Strategies in Property Business

You can focus on your own goal and needs regarding to your career in real estate development. If you want to gain more knowledge and experience as much as possible, might as well choose the first option.

If you aim for long-term income, choose the second one.

Learning More About Types of Investor in Property Business

One main reason why people start investing is to gain financial freedom. However, people go different path to reach the same goal. However, the fact is most property investors can’t achieve financial independence they expect to. Owning a property or two doesn’t necessarily make an investor financially independent. Of course, there are many factors why most property investors can’t even achieve their goal to have financial freedom even though they have done everything to make sure their business running well. Aside from finding out every factor, it is also important to know more about the type of property investor.

Types of property investors you need to know

There is no obligation for you to separate property investors into certain category. However, you can learn more from it because every type has different tendency in doing their work. There is no need for you to decide what type of investor you want to be. Of course, choosing which type of investor is better than other sounds wrong. However, every type has week and string point that you can learn from. Knowing the type of investor will help you to be more aware of the possibility of you working in certain tendency which doesn’t benefit you at all. You may have something to learn to improve your performance in property investing by understanding more about types of investor.

  • Analytical investors tend to spend months to years just to examine every nook and cranny of property markets. There is endless comparison regarding to values and sales, along with reading reams of materials. They tend to dig deeper to find out do’s and don’ts in property business. They also tend to be busy running around to seek advice from professional as many as possible. They usually spend longer time before making decision. The weak point of analytical investors is the tendency to over-analyze everything which often result in losing good investing opportunity if they can make decision earlier.
  • Passive investors tend to have no desire or passion to understand basic ins and outs of property investing. They tend to lack of consideration and calculation in making decision. They also tend to ignore consulting to professional and due diligence. The weak point of passive investors is that they tend to buy one of the first properties they come across. They tend to depend on emotional reasons in making decision regarding to property investing. Some of them even end up regretting their investment decision.
  • Active investors tend to put in some degree of work. They aim to find a good investment prospect. They at least find out about seek the basic understanding of the principles involve in property, taxation, as well as finance. They also tend to seek for professional advice. They do it to ensure their portfolio has the right structure. They also tend to do their due diligence to increase the opportunities to gain profit. Compare to analytical and passive investors, active investors tend to do better in property investing especially if they seek advice from reliable consultant.

Analyzing Your Real Estate Deals Properly

Running real estate business means you should always be ready with new deals that come your way. You need to know how to act on it since it can decide whether or not the deal is for you to catch. When you take too long, the highest possibility is the seller looks elsewhere. However, it is not good either when you jump into it too quickly. You have to evaluate the property because you don’t want to be a victim of regret in the future. Therefore, you need to develop the right system to analyze potential deals. You need to set up basic guidelines as well as perimeter to let you know if the deal needs to be pursued or passed on.

Analyzing Your Real Estate Deals Properly

How to analyze your potential real estate deals

It is not easy to set up the right guidelines and perimeters to analyze potentials deals that come your way. However, it needs to be done to prevent you from unnecessary problems in the future. Closing the right deals is important to build your real estate business progressively. Here are things you can do to analyze potential deals for your real estate business:

  • Pay attention on the time. Every deals requires different amount of time. However, both banks and traditional sellers need to the best offer that comes in the shortest time. Therefore, you are not supposed to pondering. You have to take action decisively instead. When have guidelines set, you will be able to moving forward from pondering. You can immediately do your due diligence such as finding necessary information. Then, you can make a decision whether or not to make an offer.
  • As an investor of real estate business, you need to run your own numbers since this business relies much on it instead of feelings. It doesn’t mean that you think everyone is trying to deceive you. It is just more reassuring when you gain the information you need. Besides, not all sellers give thorough information regarding to the property. Thus, you need to confirm it yourself to find out more about taxes, insurance, rents, utilities, and value. If you forget to run your own number, it is highly possible that you get bad deals.
  • The next thing to do to analyze the deal is by doing the right repairs for your market because not all repair money equals value. One upgrade may increase price value in some areas. However, it may actually decrease the value in other areas. Thus, if you are going to sell your rehab property then you should use real numbers. It makes realistic price.
  • When you see a property, it is important to not only analyze it for what it currently is. Instead, you can look at it for what it could be. As a smart investor, you should know that you can change the look of the property by using minor upgrades. Thus, don’t easily run away from a property just because of the looks. You need to be able to see through it and analyze what you can do to add the value.  

How to Secure Financial Future of Your Real Estate Company

When you decide to run your own real estate company, it means you need to do it whole-heartedly. There are several things in your life you should sacrifice such as time and money.

However, you will be able to harvest the profit once you do it right. In real estate investing industry, data and number is the guide you need to be able to take decision efficiently and effectively.

You cannot follow your intuition since real estate business relies more on numbers. Moreover, running a real estate company is like a big step in your career.

The first thing that must have come to your mind is financial matter. Financing is what you need to be capable of when running business.

Securing financial future of your real estate company

It is not easy to lead a real estate company no matter how small your business is. You cannot depend on yourself anymore. You will need the skills and knowledge of other people as well.

Building real estate business means you need a solid team to work with. It also applies to the financial security.

Secure financial future of real estate company

Here are ways you can secure your financial future:

First, it is important to know deeper about your bottom line expense number. This is how you can get a perfect view of what happen to your finance. You will know where you have and will spend your money and how you will make the payments.

Knowing more about your financial situation will also avoid you from getting caught in a wrong path. It will be easier for you to set the next plan for your financial strategies once you have figured out your financial situation in a perfect view.

Secondly, running real estate company means you have to deal with debt situation. Thus, you need a plan to make the situation better in the future.

Since you have figured out your financial situation thoroughly and understand where you spend your money, you can make better plan. Aside from writing down things you need to do, you need to be more specific about it.

You should set a date on when you will do the payments. It is better to make small payment for your debt than none. It will keep you stay motivated to get better.

The third will be relates to your debt. In eliminating your debt, it is recommended to start with the small accounts.

Next step is to eliminate your debt one by one. It will also very significant to focus on the accounts that have the highest interest rates. Then, you need to keep committed to it.

Even though all your debts won’t disappear overnight, it will make significant difference to your financial security in the future.

And the fourth or the last one is as mentioned earlier that it is important to commit to what you are doing in order to secure your financial future.

You have to practice self-discipline because there may be times when you feel like you should take a break. However, you will gain the result by having healthier financial picture if you can survive all temptation.

Raising Capital of Your Property Business with the Right Strategies

Every real estate investor has different view and goal of their investing. They also come from different background. Some investor can be part-time teacher, retired office worker, etc.

Their goal can be different as well. Some of them aim to build wealth and some others aim for monthly passive income.

Raising capital of property business the right strategy

Every investor also has different view on how to spend their fund. It might be easy for you to find people who are interested enough to invest in real estate property. However, finding people who can commit is another case.

They may be people who are willing to contribute paying for funds for the investment but they are not willing enough to follow your specific deal.

How to raise capital effectively by working with partners

You will always need fund to maintain and grow your real estate business. You will also need to raise your capital at some points.

It is quite challenging and it is unavoidable that you need help to find money for your next deal. Here are some tips to find funds you really need for your real estate business:

  1. Before finding anyone on your contact, you need to make plan. No matter how close you are with your contact, you still need a plan to find deals. You may need to connect to different people in order to find deals such as local mortgage broker, wholesaler, attorney, etc. Anyone in mind you think can generate lead needs to be considered to build your pipeline. With plan, it is easier for you to be more practical in finding deals since you at least know what you are doing. Planning your capital presentation will open more opportunities for people to pay attention on you.
  2. You need to be more specific and confident. You need to treat your audience right and assume they know nothing about real estate business. However, don’t patronize or underestimate them. Answer every question confidently so that they know you know what you are doing. You can even write down possible questions that may arise during presentation. Thus, you can prepare your answer more confidently. Make sure that your answer is specific and don’t give something vague or a roundabout answer.
  3. Make sure you learn and understand more about finance. You need to know where and how you will invest. At least, you need to know what your leads can expect in return. You need to understand all the expenses and the prospective returns. Be more prepared with the number and make thorough estimation in details.
  4. Aside from giving your partners firm number of their expected return, it is also important to give specific time of when they will get it. This means you need to frame the exact time for your investing. They don’t want to wait for several months without knowing when and how much they will earn in return. You need to convince your people to work with you and help you raising your capitals. Thus, always make sure you understand what you are doing and their expectation.

What are the Things you Should be Aware of to Become a Landlord?

Becoming a landlord is one of the solid ways when it comes to methods of investment. A landlord owns a residential income property, and it’s one of the most popular real estate investment option.  It had also risen in popularity because of several real estate tv shows such as HGTV. But what are the important things you need to be aware of before you decide that being a landlord is for you?

What are the Things you Should be Aware of to Become a Landlord?

Educate yourself in the ethics and laws of renting

Understand about security deposits and other intricacies that comes with it. It’s also essential for you to know housing discrimination laws. This is something that could cost you a lot when you unknowingly fall into the trap of being unaware.

Checking your properties periodically

If you’re just starting out, you may want to live within or nearby your property for convenience’s sake. It’s important to check your properties periodically. The regulation is commonly stated in the legal documents signed when you take in your tenants. Inspections can be done in three months intervals. This is where you inspect closely how your property fares with your current tenants as renters.  

Remember that the returns take time

The residential income property scheme is definitely not quite like the “fixer uppers” scheme. It is clearly not a get rich overnight business model. It takes time and effort in order for a property to make its returns. Being a first time landlord, you may feel impatient. So have a realistic expectations. Talk to other landlords or go to a forum if you’re curious how much a landlord makes a return on their property investment.

Enforcing rules

It’s important to know how you can enforce the rules to your tenants politely. This is essential to make sure that rents are paid on time. The relationship between tenants and landlords is supposed to be just like any other business relationships. But it’s a bit tricky. If you live nearby or you live in the same building, you’re very likely going to see your tenants every day. Even though you’re good friends with your tenants, don’t let that as a reason for you to allow late payments.

Consider repairs on your expenses

Can you do your property fixing by yourself? This is often overlooked by first-time landlords. Things such as plumbing and repairing certain fixtures of your property will cost you money. It would be so much cheaper if you can do everything by yourself when you’re just starting out. However, knowing the right person can help a lot. Contractors can get expensive over time. So if you have connections with them, consult your intention and come to a win-win situation for both parties.

Do a background check

Knowing the relevant background of your potential tenants is one way to ensure that you will get your investment returns. Check their credit score in the tools available online. However, remember that credit score is not everything when it comes to determining whether someone is a good tenant or not. Students for example, may not have enough credit scores that could help you determine whether to decline or to accept a tenant. It’s a good idea to find more about your tenants by asking them yourself.

 

Handling Your Property Business from Home

There are many ways to handle your property business. You can even work from home and it is not a bad idea at all. Many people even find it more efficient and effective to work from home. Of course, there is reason why it is still effective to work from despite of the circumstances. However, we are living in different day. Today, everything is easier due to the advance of technology. Thus, the concept of traditional office space is no longer a big deal. Everyone can work from anywhere they can as long as they have things to help them with that. Working from doesn’t mean you mix your personal and business space. As long as it is still productive then there is no problem doing it.

How to handle your property business from home

There are benefits working from home according to some studies conducted. For example, it is easier to focus and concentrate on the tasks since there is less distraction especially for those who live alone. The next benefit is the decreased cost because there is no need to pay for transport for example. There are basically other benefits received by those who have already experienced handling their property business works from home. How can you do it right then?

  • There is no big difference on how you tackle all your tasks from office or home. You still need to rely on a plan. You need to make a plan of the tasks you need to accomplish daily. You will have to list them in the right order based on the level of priority. You can try highlighting the most productive tasks so that you don’t need to waste your time. Thus, there is no reason to feel less productive when you work from home.
  • In making a plan to list the tasks you need to accomplish, you need to stick to the schedule. Thus, you will follow the schedule accordingly and finish on time. By having a time frame, you won’t lose your focus or discipline in managing your tasks. You also need to be specific in the amount of time you need to finish every task.
  • Handling property business is not all about administrative works. Sometimes, you need to build your networking by meeting with people, surveying potential are for investing, etc. Those stuffs shouldn’t bother you. You can still do all and include these activities on your work plan. You can handle them through email, phone call, text, or just go and meet them personally. Working from home doesn’t mean you are not allowed to meet people face to face though.
  • In order to make yourself comfortable yet productive, it is highly suggested to set up a work-friendly space. You need to create a specific area where you can work without any distraction. Thus, you will feel comfortable working from home but you can still focus on your work. If you live with others at home, make sure to tell them when you are available to be disturbed and not.