Real estate development is an enticing endeavor for people who want to see significant gains on their investments. The market is one of the most dynamic, though, so you should take each step with careful consideration and due diligence. As you begin in real estate development, here are five things to always keep in mind.
Be Conservative While Taking Risks
If you start out in real estate development investing a huge amount of capital and overnight success, plan to be disappointed. This is a highly competitive and complex environment, so it is best to take risks while remaining conservative with your expectations. Two distinctions to make in the beginning is that between discipline and differentiation. Discipline refers to projections about how much you plan to make each time you sell or lease a space. Differentiation is what sets you apart from the competition. Balance the two just right, and you have a winning combination.
Know the Value of Reliable Data
As technology has evolved in recent decades, we now have access to almost any type of information. Before you decide to take on a real estate development project, research, and then research again. Use reliable sources, and compare the findings across multiple platforms. Always look for data that contradicts what the masses are saying. There may be some insight that saves you time and effort.
Have the Right Team
When you are putting together a team to make your dreams of real estate development come true, choose the right people. This means always choosing the best people in the business, even if you have to pay more. Your team is what will carry your projects through from start to finish and help you build lasting relationships that add value now and in the future.
Learn the Laws
You are certain to have times when you will need to work with local communities, organizations, and governments to secure access to water, land, and even air. Understanding the laws ahead of time makes you prepared for any barriers and challenges that may arise. You will need to know about environmental impact protections and zoning. In large metropolitan areas, air rights are a current consideration, but the advent of drones will make this issue much more common in real estate development.
The impact of disruptions from 2020 are far-reaching, and the housing market is no exception. This leaves many people wondering if 2021 and beyond will be enough time to stabilize the economy and real estate investing. Here are four trends that are emerging in the housing market so far this year.
Housing Prices in Metro Regions
The median price of residential homes in metro areas saw a decline in the first part of 2021, making this a great time for those who are looking to buy. The trend is especially noticeable in metro areas of the country. There in also an increase in the numbers for people who are selling homes for the first time, so inventory may increase, which will also decrease median prices as sellers need to remain competitive. Although median housing prices are higher than the same time last year, the increase is much slower. Overall, housing prices have increased by nearly 13%, but less than 4% in metropolitan areas.
Housing Sales Compared to 2020
Even with the economic challenges of 2020, more people are buying homes in 2021. Sales for existing homes increased by just over 1%, most likely due to the higher levels of inventory and competitive median housing prices. Homes that are on the market are also within an affordable price range for most buyers this year. First-time buyers only represent about 30% of home buyers, and this may be an indication of people downsizing or relocating. The southern part of the country is seeing the highest percent of home sales, followed by the Midwest, west, and northeast.
As of June 2021, new home construction continues to decline, and it is at an all-time low as of June 2021. Many predictions indicated that new construction would increase around the middle of 2021, but those predictions have not materialized. Instead, pricing for new homes have made them unrealistic for many buyers. When combined with the inventory and competitive pricing of existing homes, buyers are choosing to get the most house they can for their budgets.
Homebuyers are making purchases much quicker compared to last year. The increase in people looking to buy may influence the decision to jump on a good deal rather than wait. On average, listings are for sale just over one month before they are under contract and off the market. Analysis of buyer behavior and the real estate market indicate that the time on market will continue to decrease.
Each year, millions of homes are bought and sold in the United States, and investors review data released for the housing market value. If you are curious about the housing market or considering investment, here are phrases that you should understand about housing market value.
Median Sale Price
When you look at the median sale price for homes in the country, the data will show a dollar amount and a percentage of increase or decrease. The median price can be viewed as the average. In June 2021, the median sale price was just under $390,000, demonstrating an almost 24% increase compared to last year. Use the median sale price of homes to determine if the housing market is affordable for buyers and profitable for sellers.
Average 30-Year Fixed Mortgage Rates
Fixed mortgage rates reflect the cost of buying a home, typically shown as an interest rate. Higher fixed mortgage rates coincide with a downturn in purchases because people cannot afford the higher monthly payments. When the mortgage rates decline, you will see more people buying homes. In June of this year, the average rate for a 30-year fixed mortgage was 3%, compared to almost 5% in 2018 and 2019.
Median Days on Market
Median days on the market show you how fast properties sell once they are listed. This means that buyers have to act quickly to get the home they want and can afford, and sellers can expect to get out of their properties sooner or later. The average time that it took to sell a home in June 2021 was 14 days, indicating that it is a highly competitive market.
Months of Supply
Months of supply is based on the number of homes that are listed for sale compared to how many people are looking to purchase a home. As of June, there is a little more than one month of supply of homes on the market. This is significantly lower than past years. In 2019, there was a supply of homes for sale that would satisfy buyers for four to five months.
Sale-to-list price indicates how much the actual sales price was above or below the original listing price. In highly competitive markets, buyers may offer a price that is more than the list price to ensure that they get the home they want. The sale-to-list price is lower when there is little competition or the home’s actual value is below the asking price. In June of 2021, the average sales price was slightly more than the asking price.
Although some websites promise an easy way to buy or sell a home, there is no substitute for a real estate agent. The experience that agents have can help clients navigate the tricky real estate realm while finding their dream home. These are three of the top reasons that make real estate agents irreplaceable.
For people moving to a new neighborhood, real estate agents can provide home buyers with knowledge of the area. This includes information on the location of schools, utility bills, taxes, local attractions, hiking trails, and lots more physical information. Although real estate agents cannot discuss people or answer other questions that might violate the Fair Housing Law, they are still a wealth of information about whether the physical attributes of a neighborhood fit a client’s needs.
A major part of buying or selling a home is negotiation. Real estate agents can provide expertise for the negotiation process. Real estate agents understand their listings and can point out issues with the property that can drastically impact negotiations. While some real estate agents have formal training in the negotiation process, all real estate agents have experience in performing these specific negotiations. Agents also know the legal particulars of home buying and selling that people must adhere to that impact the negotiation process. Using special techniques and a vast understanding of the housing market, real estate agents can negotiate for the best deal possible.
Not all sellers list their homes online for individual sale by the owner. Real estate agents have exclusive access to many listings. Going without a real estate agent could severely limit the available properties. Real estate agents also do the hard work of arranging a viewing for their clients. Agents call other agents or brokers to set up a viewing. They can also discuss the home more with the other agent to find out if it meets a prospective buyer’s needs, which saves a wasted trip.
The guidance and experience of a real estate agent are integral to a smooth and successful home buying or selling process. There are too many risks for going through the process alone. Real estate agents know their properties and the process well, ensuring a good deal for their clients.