Real estate development is a popular career and past time for many entrepreneurs. Although the financial success is a tempting reason to enter the real estate market, developing land or office space requires a special skill set. Beginners have many questions about financing, permitting and regulations, and other aspects of real estate development. Luckily, there are tons of resources that provide sound advice and answer many common questions. Listed below are a few of the time tested favorites.
Real Estate Development: Principles and Process
This text written by Mike E. Miles provides a thorough overview of real estate development. Based on an academic perspective, this resource provides a general understanding of real estate development basics.
The Real Estate Game: The Intelligent Guide to Decision-Making
In this comprehensive resource guide, William J. Poorvu draws from his vast array of life experiences. Poorvu served as an educator at the Harvard School of Business for nearly three decades and has been in property management and development for more than four decades.
Property Development for Beginners: A Beginners Guide to Property Development
In this well written collection, author Steve Chandler offers a realistic look at the benefits and challenges of choosing a career in real estate. He provides pointers and additional resources for serious investors.
Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money
Matt Faircloth is an accomplished real estate investor and published this resource outlining some of his most successful tactics. This title is geared toward current investors and serious beginners. Faircloth primarily focuses on fundraising and other financial principles of real estate development.
Professional Real Estate Development: The ULI Guide to the Business
In this textbook style resource, authors Richard Peiser and David Hamilton provide information vetted by the Urban Land Institute. Through a variety of case studies and valuable insight, this resource covers the basics of residential and multifamily properties as well as office space, retail, and industrial real estate development opportunities.
Making it in Real Estate: Starting Out as a Developer
John McNellis provides a true nuts and bolts overview for beginners in his latest educational title. He helps readers turn their ideas into reality by providing his expertise on topics such as leadership, turning down an opportunity, and taking risks.
The global pandemic changed the business world for nearly every industry. Many of the changes were unavoidable and unprofitable, but things look promising for 2022. Many experts are optimistic regarding commercial real estate development. Concerns exist, and all investors need to understand the possible challenges. To succeed, anyone involved in real estate development will need to remain flexible and adapt to the market.
Potential Market Complications
Real estate professionals do not expect any complications with the same negative impact seen in 2020 and 2021. COVID variants could continue to appear for many years. Health experts, however, do not believe any will cause the type of lockdowns previously experienced. Government agencies monitoring inflation risks will adjust as needed to keep the stock market as happy as possible. Price increases may influence some future development, but the improvements in the marketplace will prevent rises in oil prices and material costs from harming growth.
Expected Industry Boosts
Repairs to supply chain problems will ensure that products flow freely again. These repairs will prevent the past shortages of building materials and retail inventory that plagued all consumers over the last couple of years. An additional boost for real estate development is optimism. In 2021, new business license applications were up, and experts predict that in 2022 there could be an increase in applications of 28 percent over 2020.
Increases in Demand
The real estate development market could see a combined rush from different investors. Many businesses that thrived before the pandemic had to put their plans on hold, but 2022 offers the opportunity to return to previous expansions. Another possible effect is the endeavors of new entrepreneurs. Many business-minded individuals chose to find a new path after their jobs became obsolete during lockdowns. The options could make many real estate markets busy as buyers vie for all property types to meet their needs.
The last two years have been difficult for everyone. Optimism for what possibilities 2022 may hold has already boosted real estate value in many regions of the United States. Development has continued slowly and steadily over the last few months and is likely to increase substantially as the year unfolds.
Whether you’re an investor or a buyer/seller, knowing what moves the real estate market is key to maximizing gains and getting the best deal possible. One of the key factors that impact real estate value is seasonal changes. Buying or selling propery in wintertime can be a difference of night and day when trying to sell the same unit during summertime. Here are three ways on how cooler weather can affect the real estate market.
As with any financial market, the real estate market is dictated by supply and demand. There are seasons of the year wherein buyers outnumber sellers, during which time it becomes more challenging to purchase a property within your desired budget due to the bigger amount of bids coming in. Summer is typically the busiest season of the year, with people buying more aggressively than any other time of the year. Come wintertime, the demand subsides and so does the market prices. This makes it a great time to buy real estate but not so much to sell one.
Different Staging Process
Staging a home that you want to sell during wintertime will involve slightly different design elements than when you’re staging a home during summertime. For starters, you’ll want to crank the furnace or boiler up to keep the temperature indoors nice and cozy for home buyers who come in to check the property. Boosting curb appeal during wintertime can also be more challenging since there is less natural light in the day and less vibrant colors surrounding your property. You can boost your property’s curb appeal by adding tall grass and purple-colored cabbage plants for some background contrast.
Lower Realtor Costs
With a lower demand in housing, you have more wiggle room both as a buyer and a seller. Realtor costs, for instance, can be negotiated to reflect the seasonal freeze in demand for their services. Contractors may also offer lower pricing for their services to get more business in a time when demand for work is seasonally lower.
Regardless if you’re a buyer or a seller, patience is perhaps the most important value to succeed, especially in a market like real estate where seasonal changes impact valuation. Simply being patient and timing your purchase or sale can net you savings or profits of 5-10 percent easily.
Climate change on earth is very real as temperatures continue to rise higher to create extreme weather conditions. Therefore, it is necessary for real estate owners to ensure they have the right measures set in place to avoid any negative impact from upcoming extreme weather situations. Workers in the insurance industry are keeping a close watch on the changes in weather because certain weather conditions can increase the premiums on insurance plans or change the rules in different regions. There are some risks of climate change that cannot be insured, and in those cases the reinsurer’s approach is very important to primary insurers. Reinsurers will raise the rates for primary insurers as severe weather creates more loss, and then the primary insurers will raise the costs for those who buy insurance like tenants and property owners.
Climate change and severe weather has made it so that real estate investors must really understand the importance of surviving the risks of bad weather by creating a strategy that will decrease losses. Some companies have chosen holistic methods to protect themselves such as climate change related shareholder activism and the possibility of huge lawsuits. There could be less renters in demand for several reasons related to weather including bad storms and floods, heatwaves, wildfires, drought, and water stress. It is also possible for damage to nearby buildings and homes to make it so that tenants cannot access their own building and when this happens, real estate owners must deal with the risk of climate change and severe weather affecting their income even when their own building is protected from extreme weather issues.
Since climate change can pose such huge risks to financial systems all over the world the Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board. The TCFD makes sure climate-related financial information and risks are reported faster and with more information. These bad weather risks are just like any other financial risk and can be disclosed in a company’s profit and loss account. As long as real estate owners and managers understand that they cannot ignore climate risk and instead decide to assess the risk and opportunities with climate data, everyone in the real estate business will be able to build resilience from severe weather troubles and create much better outcomes.
Closing costs comprise a large chunk of what you might have to pay for as a borrower and property buyer. Failing to factor closing costs into your budget can have a detrimental impact towards your ability to keep up with your mortgage payments. Here is everything you need to know about closing costs.
What Is It?
Closing costs, as the name implies, refer to the costs that a borrower must pay when he/she finalizes the purchase of a property, be it residential or commercial. While these costs can add up to a considerable sum, both parties involved in the transaction shoulder a portion of the closing costs.
What Fees are Involved?
The seller pays a number of the fees that make up the closing costs of a property he/she is trying to sell. These include the real estate broker’s commissions, which can easily reach up to six percent of the property’s purchase price. Other expenses included in the closing costs are your application fees, legal representative’s fees, and any discount points that are useable. Taxes are also tacked into a property’s closing costs, which can sum up to about 15 percent of the agreed-upon purchase price.
What is a Title Search?
Another common cost category you’ll encounter when trying to close on a property is title search. A third-party company performs a comprehensive background check of the property to make sure there are no undisclosed heirs and unpaid claims on the property being sold. Home buyers are also expected to pay title insurance fees, which basically covers the policy holder of any costs associated with ownership issues.
How Do You Minimize Closing Costs?
One way to minimize your closing costs is to pay cash for the property. You can reduce your total costs by as much as 1 percent of the property’s purchase price. You also effectively eliminate fees, such as loan origination and appraisal charges. You can also cut your closing costs, as a buyer, by foregoing the services of a realtor. Instead, deal directly with the owner. While this means more due diligence required on your part in order to make sure the transaction is completed properly, it helps you avoid the hefty commissions paid out to a realtor.
Make sure you fully understand your exact closing costs before you even sign any paperwork or give a confirmation to the other party involved. You can find a number of free closing cost calculators online that can help you determine your estimates.