Real Estate Development – Three Essential Things You Must Do Before Starting in Property Development

If you start your property development business the right way, you are building a foundation for success. Start it the wrong way, and you could be headed for disappointment, stress, and possibly even large financial losses.1. Manage Your Property Development Projects As A BusinessUnless you’re prepared to forfeit some of your profits and engage someone you trust to look after your property development project, it’s very important that the mechanics of property development are understood fully so you don’t end up in all sorts of trouble. We decided right from the start to treat building our property portfolio as a real ongoing business and therefore created a property development strategy and planned and acted accordingly.Advice from our property development legal and accounting advisors was to set up our property development business in the right type of entity from the very beginning – some things can’t be “bolted on” later. We also ensure that we keep good records and use property development accounting and property management software. We found a strategy that would be a good fit for us, looked at the big picture and began with the end in mind.Initial and ongoing property development education is extremely important. A good place to start is to learn the basic techniques of property development. Then continual reading and listening to financial news to determine current and future trends.2. Develop A Property Developer Millionaire MindsetLearning and implementing the mechanics of property development may allow you some level of initial success, but newcomers who aren’t passionate about property development and don’t alter their way of thinking and create a property developer’s mindset inevitably can run into problems. Many of the decisions you make as a property developer are counter-cyclical, for example, you may be buying when other inexperienced property developers are making panicked sales.People who haven’t mastered their emotions around money tend to make poorer decisions under those circumstances. For example, many novice property developers aren’t able to preserve when needed, and a lot simply give up after struggling, both financially and emotionally, during their first attempt at property development.We’ve spent a lot of time researching the rich and identified certain common characteristics and habits that contributed towards their success. As soon as we adopted some of these ourselves, we were able to accelerate our learning curve and we saw a marked improvement in our own ability to make larger profits through property development in a much shorter amount of time.3. Learn How To Leverage your TimeWe had a clear vision and a huge desire to work smarter and not harder so we sat down and worked out an achievable step-by-step plan that would enable us to reach our goals much quicker.One thing that made a huge impact on us achieving our goals faster was adopting the ‘Pareto Principle’ (more commonly known as the 80/20 rule). This helped us to stay focused on the “20 percent of things that mattered to achieve the 80% of results” and saved us from wasting an enormous amount of time and energy on things that just weren’t necessary.We also leveraged off other people’s knowledge (OPK) other people’s time (OPT) and other people’s money (OPM). We built a great team of experts who continually advise and support us – especially a ‘property development savvy’ lawyer, accountant and finance broker.
A strong foundation requires a good business plan, the right mental attitude, and the ability to get the greatest possible results from the time you invest in your property development business.If you try to start in real estate investing or property development without this strong foundation, you are subject to a much higher level of risk, and the consequences can be catastrophic. Start well, on the other hand, and you can use property development strategies to build a long-term, profitable real estate empire.

How to Successfully Develop Commercial Real Estate – Part 2

In Part 1, we pointed out how complicated developing commercial real estate can seem unless the focus is on the most important aspects of each phase of the development process. We also pointed out in Part 1 that there is a fundamental component that stretches across each of the major areas of the development process, from buying the land, to building the building, to attracting tenants, to managing the space as landlord and even refinancing or selling the completed project. This single component is money. All development projects need money, one must acquire the land, pay for certain up-front costs, pay to get the project built, and pay to support the building while finding enough tenants to fill it. Since development projects can be expensive most developers look to third parties such as commercial banks and investors to supply the money needed to “finance” the development project.So how does a developer get a commercial bank and equity investors to finance a new development project? Once again, focusing on the single most important factor to the lender and the investor supplies the answer. The single most important factor in attracting money (financing) to a development project is the belief they will get paid back (and hopefully make a little money). The most reliable way to prove to investors that they will get paid back is to attract rent paying tenants to the project.The tenant is the most valuable asset in any commercial real estate development project. Sign up the right tenant or tenant mix and you may be able to choose from a pool of eager construction lenders and equity investors to finance your development project. What makes the tenant so important? The tenant is the person or entity that will enter into a long-term agreement to pay rent, bring people to the site and make it attractive for other tenants and businesses. Rent creates cash flow and cash flow help lenders and investors form a reasonable belief they will get paid back. Of course, in a development project certain tenants, are more valuable than others. Most lenders and investors want to see tenants with, a long history of operational success, solid financials, well established brand or niche and a financially stable parent company or owner to guarantee the long term commitment or lease agreement.The lease agreement might be the most important document a developer can produce. It is the document that will be given the most weight by lenders and equity investors in determining their desire to loan or invest. The lease agreement establishes a legal obligation on the part of the tenant to pay the developer rent often over a long period of time. Of course, getting a tenant to sign a long term lease is not that simple. Remember the building(s) is not yet built and probably will not be for a couple of years. So how does a developer find these coveted tenants and get them to sign a legally binding contract to pay them rent in a building that doesn’t exist yet? We will explore the fundamental key to successfully finding and securing tenants in Part 3 of this Article.