Planning Your Real Estate Development Business
Real estate development is a pretty large scale kind of business that is undertaken with a large budget over a long period of time. That is most likely why you need a good real estate development plan before getting into the business of real estate development.
The concept of development in real estate is to convert raw resources that come in the form of land, building materials and infrastructure into a profitable building such as an office, apartment building, or a subdivision.
In effect, when seeking to fund a real estate development along with a real estate development plan, one needs to specify to the loan company how your planned business will generate income that will enable you to pay back your loan in the end.
Coming up with a real estate development plan is essential since it will be the basis of your development timelines, and will determine the details of your loan (the amount, the equity, and the terms).
A good real estate development plan is an essential part of your proposition to a lender regarding the feasibility and potential profitability of your proposed real estate development project. After all, it is obvious that a lending company would only feel at ease lending money for a project that was likely to succeed and pay off in the end, as opposed to a project with no clarity and no assurance of good returns.
Essential elements you need to prepare in order to create a comprehensive real estate development plan to get you started with your real estate development business
The project
You need a piece of land that has potential when it comes to possibly earning for you in the future. Consider all of these possibilities and select what most applies to you and your desired business outcomes.
To do this, you will need to consult with an architect to help you prepare a design and a concept for your desired structure. This design will help your contractor determine the approximate cost of building and furnishing the structure.
Financial details
Since you now have the overall architectural and interior design of your structure, you may now detail all the expenses that you are expected to and have already incurred so far. This includes development expenses, professional fees, agents’ commission fees, as well as possible cost of interest.
Make sure that you incorporate a budgeting scheme into your plan so as to keep your finances under control. Also, be flexible enough to fit necessary expenditures that were not foreseen by the plan without compromising the budget for too much.
Lastly, keep track of your expenses and how well you are sticking to the budget by drafting an actual monthly report.
Always ensure that you are up to date as to the requirements when it comes to financing a large-scale project such as a real estate development. A real estate development plan includes a detailed graphic about the expected cash flow throughout the project up until its completion where sales are expected.
Market analysis
This may require some research into the market trends of similar and comparable businesses today and the projections of such businesses in the coming years, especially during the period that you are expected to finish and sell. The market analysis is the detail that justifies the projected profit for your development project.
Contractor
This includes all the possible details about your builders. Here you may include all building agreements done prior to the start of the project, the total cost of building the project, as well as the terms of payment and terms of costing as to whether your builders have a fixed rate or if they opt for a cost plus arrangement.
Summary
This part basically lays out the entire project on a sheet. This may include your management and the manner of it; the people involved in the project such as the builders, the planners, the professionals, and the managers; the timelines of your project; and the details of the plans you have as to how you foresee the way you will market the project once it is done and up for sale, among many other details.
