What is Real Estate Development?
Real estate development is a branch within the real estate industry that focuses on the building of homes, retail spaces, commercial facilities, and more. Typically, it begins with a plan and ideas and ends with a fully developed property that’s ready to be purchased or leased. The process can take weeks and is broken into many steps, but we’ve compiled the main points into three simple steps that you can follow along with to better understand our process of real estate development.
Our Process
Stage One: Pre-Development
Pre-development begins with thorough research of the area we’re looking to build on. This includes average housing or building costs, average sizing, quality, and whether the community is expanding or not. This stage also involves obtaining permits and focuses on due diligence. Investments are made with the plan of turning into high Returns on Investments (ROIs) in the future. We gather all necessary approvals from the government, which usually include a land use permit and a building permit.
Other common steps in this phase include:
- Surveys
- Environmental Assessments
- Site Plans, Development Plans, and Building Plans
- Permitting
- Land Acquisition or Securing Rights to Purchase Land
- Market Analysis Studies
- Construction Financing Plans
Stage Two: Construction
This is where the real fun begins. The middle stage involves the construction portion of the development process. The risks are reduced due to the pre-developmental stage being completed, but there are still some involved, and it’s important to realize this. At this point, the project is typically fully financed by outside investors, sponsors, or loans.
Common steps in this phase include:
- Physical Construction
- Using Construction Financial Plan
- Project Marketing
- Pre-leasing
- Arranging for a Property Manager
- Arranging Permanent Financing of the Facility
The end of the construction phase is often marked by being granted a Certificate of Occupancy, which allows for the commencement of the construction period.
Stage Three: Operation
We’ve reached the end of the development process and the beginning of the building’s life in operations. The project is typically still financed with construction financing or short-term “bridge” financing, which lasts until it reaches a certain occupancy level. At this threshold, it reaches “stabilization” and can be financed using long-term financial plans.
Common steps in this phase include:
- Continually Marketing and Leasing
- Finding a Buyer
- Determining a Long-Term Holding Strategy
- Increasing Property Management
- Achieving Stabilization
We’ve reached the end of our development process, and now we have a newly built building that’s fully financed and in use. Everyone makes profits from their investments, and the community can use the building to their benefit. Hopefully, you’ve learned something through these steps and now have a better understanding of how our company does our development.
