Part 4 - So You Want To Be A Developer?

In the first 3 installments of this series of blogs, I have tried to take you along with me on what it is we, as developers/contractors/real estate agents, think about when we are doing a project. Though there are many factors involved that require specialized work, I hope I have given those of you that are considering stepping out and doing your first house, etc. enough information to ask the questions needed to proceed. In this post I will cover financing, marketing, and odds and ends.

FINANCING:

After having the design completed, it's time to get the money to build the project. I will discuss our experience with Hard Money Loans and Private Money, as everyone is aware of the options for traditional financing with banks, credit unions, etc. HML's often get a bad rap, but there are very legitimate reasons for using them in certain cases.

For the most part, we use HML's due to the fact that we build projects on "speculation", (meaning there is no end buyer or user at the time we begin), and our projects are "new construction" (meaning that until the building is actually built, the only collateral on the loan is the land). Such a loan takes a sophisticated investor that understands the whole process, and is willing to take the 'risk' assoicated with it in return for a good profit on their money. However; there is a limit to what a project can carry, and reputable HMLs know the limits and don't act as sharks.

As with any other element of real estate if you do your homework, and know the value of the project, the total costs to develop the project, etc. and figure costs upfront, based on using hard money (and you know what all those costs are), you can have a successful project. It's all about planning, and having a project with enough profit potential to handle the costs of financing with HML.

Where people get into trouble is when they start a project, can't find money, and get desperate, then go out and take whatever money and terms they can find, thinking they will be able to cover it by cutting costs, or ?. Never do things out of desperation, know when to walk away!

Private money is also an option for financing. Private money is money you borrow from a friend, family member or someone that lends out their own money for investment purposes.

Loan Brokers are the ones that have the ability to put these types of loans together, and it's important to work with someone that you feel comfortable with, that understands the buisness of real estate, your specific situation; and will do what is best for all involved. It's important for everyone to do their research on the various loan options available and make their decisions based on their specific circumstances.

MARKETING:

We have used various marketing over the years, and done all of it ourselves. However; you need to understand the market that you are trying to attract, the competition, etc. and market your property accordingly.

Many of you won't need to deal with marketing your propreties, because you will list with a good agent.

Here's a list of some of the things I've used in the past that has brought buyers:

*  Sign or banner on property (make sure to put web address)

1. *  Website - A website devoted to a single listing or multiple listings
2. *  MLS - As Brokers/agents with access to MLS, we always list properties for   
3.     sale on there, because we want other agents working for us. 
4. *  List with an Agent - Agents work with BUYERS that are ACTIVELY looking for 
5.     property. Most people calling on ads, do not buy the property they call on,
6.     but another property they're shown from the initial call.
7. *  Direct Mail - Postcards sent to targeted businesses that are in the market for
8.     the specific type of space you have. (This if for business type properties)
9. *  Trade shows (Home Show, Business Expo, etc.) depending on the type of
10.     property you are trying to sell
11. *  Youtube video (for unique properties) can be uploaded to website
12. *  Facebook page
13. *  Blog

All of these things are easy, low cost ways to get you exposure for your property. Only you know what your experience and skills are, whether you should list your property or do it on your own.

I hope this series has helped you toward learning a little more about development. Someone asked me to share what I liked about development, and I'd have to say that finding a raw piece of land, designing a project that goes on it, and knowing that whatever you build there is going to impact the neighborhood for years to come is a big part of it. People will live in the space and raise families, practice whatever it is they do for a living, come to purchase something from a store in the space, there's so many things that will happen in that space over its life, it's exciting to think about it.

Of course, there's risk involved. There's a huge investment of time; and money. But, in the end, it's a great way to make a living. If everything goes according to plan, you get the land for the price you need, the development costs are within the planned margins, and the sales price is where it was projcted or often higher, there's good profit in it!