Managing real estate development is a tricky task with a high risk of failure. You must be on top of every detail to ensure everything works smoothly. That’s no small feat.
When people think of the real estate industry, they think of big dollar signs. Yes, there’s money to make in the industry, but many fail to consider the inherent risks. This article will cover the process, real estate development risks, and property management.
The Real Estate Development Timeline
Effectively managing real estate development begins with understanding the business processes property managers must undertake. Seasoned developers will tell you that the real estate development timeline is long and complex, with many pitfalls.
Each developer should start by identifying a desperate need in the market. If you tap into the right source of consumer frustration and solve it, you can almost guarantee your project’s success.
No matter what the goal, every project has a similar life cycle.
Pre-Development or Planning
During this stage of managing real estate development, you must do your due diligence. Collect as much evidence as possible and research topics like the following:
- Costs
- Potential income
- Zoning requirements
- Permit requirements
- Viability
- Property plan
Giving this stage ample time helps you identify potential snags and opportunities before committing to construction.
Construction
Your chances of receiving financing during pre-development are slim because the risk outweighs the potential benefits for investors. The construction phase is not as risky, so you may attract more investors if you make it this far. Contrary to what the name suggests, this stage goes beyond building. You must also:
- Market the property
- Arrange pre-leasing
- Hire a property manager
- Set up a permanent financing solution
- Manage your budget carefully
- Get signatures on real estate documents
- Look into data security management tools
Operation
The risks are lowest at this stage as the focus shifts from building to managing real estate development. You’ll need to up your customer service game to keep existing tenants happy and attract new ones.
You’ll need to look into the following:
- An ongoing advertising strategy
- Lease or sale agreements
- Security systems to keep electronic documents and data safe
- Finding tenants or a buyer
- Creating a sustainable business or opting to put the development on the market
Real Estate Development Risks
There are several risks in managing properties. What these are will depend on the property type and where it is in its life-cycle.
Pre-Development Risks
The primary risk here is that you must usually fund this phase yourself. Investors and financiers will not put in money until they see a well-thought-out business plan and evidence to support the potential for returns. They want to feel secure when putting in money.
Projects may also stall due to zoning laws, the inability to get planning permission, or the inability to obtain the requisite property.
A further risk is that it’s easy to forget tasks because there is so much to do. This could result in missing deadlines or leaving out crucial information in applications or briefings. That’s a quick path to failure.
Construction Risks
Construction indicates a solid start and shows potential investors that the project is real. However, there are still many risks at this stage. The primary of these is miscommunications that cause delays.
For example, your tiling team could have to wait because the plumbers have not yet arrived. You could also face severe delays due to supplies not arriving promptly.
Ordering supplies is a delicate balancing act. You don’t want them lying around the site because they’re at risk of being stolen. You also do not want to incur interest on capital draw-downs until you must. However, delaying construction because of a lack of materials is also expensive.
An ordered checklist and management system keeps everyone on the same page and helps you keep track of all these disparate elements.
Operational Risks
Managing real estate development is a business much like any other. You can succeed if you know what your target market wants and carefully control the details.
Real Estate Development Project Timeline Management Software From Rabbet
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