Real Estate Development Basics
Before you get into real estate development, you need to know a few basics. You need to know about the capital involved, the logical order of real estate development, and the role of government in the process. There are also a few things you should avoid, like overestimating your abilities and accumulating debt to finance your property.
Capital used in real estate development
When funding real estate development projects, real estate investment firms usually obtain funds from a variety of sources. These sources can include debt from financial institutions and equity from investors. These funds are then arranged in tranches, according to their risk levels and priority. Some projects also include government grants. If your project is seeking external financing, it is important to know the different types of capital.
The capital used in real estate development is divided into two categories: working capital and equity capital. Working capital is the cash that a real estate development company has in hand, and assets that can be converted into cash. This measure enables an investor to determine if the real estate company has sufficient liquidity in the short-term. It is calculated by subtracting current debts from current assets. Equity capital is money that investors invest in a real estate company in exchange for a share of ownership. This type of capital is generally more risky, but it offers an unlimited return potential.
Logical order in real estate development
Following a logical order in real estate development can minimize risks associated with the project. There Bill Bhangal are three stages of the development process: pre-development, development, and construction. Following this logical order reduces the risks associated with project execution, cost, and schedule. The pre-development phase starts with a thorough analysis of the project and focuses on research, due diligence, and permitting. This stage can last for several months, and carries the greatest risks.
Government role in real estate development
There is an ongoing debate about the role of the government in real estate development. While advocates of a free market system may argue that government intervention is counterproductive, there are legitimate reasons for intervention. This article explores common methods of government intervention in real estate, including taxation, zoning, rent control, minimum and maximum price policies, and licensing of market participants. It also looks at the banking system and the role of financial institutions in real estate development.
In recent years, there has been a shift in government’s role in real estate development. Instead of merely generating revenue and providing services, real estate now plays a vital role in workforce development, eliminating blight, and creating real quality of life. As a result, local officials are better able to influence what happens with property.
Cost overruns in real estate development
One of the most common reasons for cost overruns in real estate development is that the developer failed to manage pre-development expenses. This mistake can lead to significant budget overruns before the project even breaks ground. Typically, pre-development information is organized in static spreadsheets or file management systems, which are prone to human error and inaccuracies.
This research sought to determine the extent to which the Contracting Process influences cost overruns in real estate development projects. In order to do this, the researchers used descriptive survey and correlational research designs to identify the causes of real estate cost overruns. The study population comprised 7 professionals from active real estates in Nairobi and Kisumu counties and 10 key informants from the real estate industry.