To be a successful real estate developer, you must have three important competencies. Those are having knowledge of the market, putting land to good use, and working well with general contractors. Here’s a deeper look at each one.
1. Knowledge of the Market
Having knowledge of the market is key to being a good developer. If any part of the economy, job market, or real estate market makes a fluctuation, which it so often does, a developer must be aware of it so they can avoid losing money.
It’s important to know the area as well. Whether a developer is building apartment complexes or residential homes, having a sense of what the schools are like in that area, how easily accessible major highways are, and what the crime rate is can all factor in to how much and how quick the real estate will sell.
2. Putting Land to Good Use
Buying land and doing nothing with it is not going to bring you money. If you’re not able to develop the land within a year, it’s probably not worth buying; great developers know this as a rule of thumb.
As a developer, there’s the option to wholesale flip your land. If buy land at a good price, are able to build the roads and put in the sewers but find yourself not able to complete the next steps, sell the lots to smaller builders. You can make just as much money improving the land and developing the site as you would if you built the homes as well.
3. Working Well with General Contractors
Knowing how to negotiate and weed out the bad general contractors is crucial if you want to become a successful developer. By getting multiple bids, you’re able to know what your real cost is going to be and you can find the contractor that is best suited for the job.
It’s also important to know how to keep your general contractors focused. I’ve heard of developers who freeze a contractors bills if they had any outstanding complaints. Once the complaints had been handled, the bills would unfreeze. In doing this, he never had a project that didn’t finish on time.