In the US, real estate development is an industry that is highly regulated. State agencies handle the taxation, labor, land, and property laws, and some financial operations. They also handle zoning regulations and building permits. In many areas, the public sector is the primary partner in the development of communities and public properties.
Pre-development
Pre-development is the stage of a capital project that takes place between the creation of a concept and the beginning of the design process. This is a critical time for gathering information, exploring options, and determining the direction of the project. Without the proper planning, a development project can go wrong and end up costing much more than expected. However, with the right planning, a project can be a sustainable one that produces a positive return on investment.
Before a real estate development project can begin, it must first go through pre-development. This process begins by determining the feasibility of the project and its financial and environmental impacts. It also includes obtaining land entitlements. Without these approvals, a developer cannot begin construction.
Construction
The construction phase of a real estate development project is generally financed by an outside investor or sponsor through a construction loan. The loan is usually structured so that it is payable in installments upon certain construction milestones. Investing during this phase typically produces lower returns than pre-development investments but higher returns than those made on stabilized buildings. The construction phase ends when the property obtains a certificate of occupancy, which allows it to begin operating. This certificate is obtained through an administrative process and based on objective criteria.
While traditional industry titans typically dominate New York’s construction and real estate development industries, a younger generation is gaining ground and demonstrating a commitment to diversity. Women and people of color are increasingly becoming leaders in the industry. These individuals make up City & State’s inaugural list of 40 Under 40 in real estate and construction.
Expansion
Real estate development expansion is the phase in which the real estate market grows stronger after a recession. This phase is characterized by low vacancy rates, high rents, and high property values. During the expansion phase, investors typically purchase new rental properties and renovate old ones. Demand for rental property is high and finding tenants is easy.
The role of agents in real estate development expansion is central. These agents invest their earnings in new real estate developments and strive for synergies with other land uses. This Bill Bhangal is an integrated process that changes the built environment of an entire city.
Financing
There are many options when it comes to financing real estate development projects, but banks are the most common lending source. They offer loans for both new building projects and renovation projects. The construction loan process involves a long-term loan and several phases. These stages include a hard and soft-cost budget, appraisal report, and environmental report. The loan administration process also involves a lender’s engineer.
The first step is securing a land or building plot. Depending on the size and nature of your project, you may be able to use equity. However, it is not easy to obtain equity, particularly at the early stages of a project, when the risk is higher. Getting bank loans at this stage can be difficult. The latter stages, however, are typically funded by a combination of equity and loans.