Real estate development is a single profession that involves building – most of us had at one point or another thought this. But is that the fact? Or is it not? If you are curious about what exactly is real estate development and how it works, then this is the article for you.
Definition of Real Estate Development
Real estate development is alternatively known as property development. The word real estate development is a combination of two terms: real estate and development. The definition of both terms collectively lends the overall meaning to the compound word real estate development.
The dictionary definitions of “real estate” and “development” read like this:
- property consisting land and/or buildings.
This means that land and any improvement on it is considered real estate.
- The process of developing or being developed
- An event constituting a new stage in a changing situation.
Looking at the definitions above, one can easily define real estate development as the process of developing a property whether land or building. We can also say that it is the result of improving or changing an existing property (based on definition number 2 of development).
But these definitions are inadequate to express the full spectrum of real estate development. Why? It is because real estate development begins way before the real estate development process starts. First, the property is sorted for, acquired then developed, marketed and sold out or leased then the process begins again with a newer project.
This entire process makes real estate development a business rather than a profession just focused on developing buildings. It is also what distinguishes it from other activities like construction or housebuilding. Without these facets of purchase, sales, marketing and leasing, there would probably be nothing like real estate development.
Are you interested in the real estate development business?
You can choose from either end of the real estate development spectrum to specialize in. You may choose to make your profit from selling raw land or parcels to others or you might decide to earn in the middle – developing new buildings or renovating existing buildings. It’s also good business at the end of the spectrum where you help others market, sell or rent out their developed property. Whichever the case, the real estate development business is a profitable venture.
It is a profitable venture not only because of the sizeable economic profit that it brings but the value it provides. So whether it is building new structures or modifying existing ones, the goal of real estate development is to improve pieces of real estate to increase their value and meet the space needs of the owners and occupiers alike. A person who handles this business process of real estate development is called a real estate developer.
Who are Real Estate Developers?
A real estate developer can either be a person or a company that coordinates the process of real estate development from the beginning to the end. They are skilled professionals responsible for converting your ideas into real property.
Typically, a real estate developer’s job looks like this: purchase a piece of land, plan the marketing of the property, create the building program and design, obtain the necessary public approval and financing, construct the structures, rent, manage, and eventually sell it.
But sometimes real estate developers may not carry out all of this process. For instance, a real developer can find a property, get the plans and permits approved but then sells it out with the approved plans and permits to a builder to continue the process.
In another scenario, if a real estate developer is also a builder, he may decide to purchase only those properties with the plans and permits to build. In doing this, construction starts immediately and prevents the time-consuming process of obtaining approval for the property.
This makes it obvious that real estate developers may not necessarily orchestrate the process of development from start to finish.
Developing real estate is a collaborative endeavour, so much so that real estate developers are required to work with several professionals such as architects, city planners, engineers, surveyors, inspectors, contractors, lawyers, real estate marketing companies or leasing agents. These professionals lend their expertise at different stages of the development process to create a satisfactory project.
To become a real estate developer, you only need a license from the government to enable you to operate in a country. This means then that, real estate developers are licensed professionals who do not necessarily need to have a certification.
Real Estate Development: Ground-up development vs Redevelopment
There are two main paths opened to real estate developers in real estate development.
- Ground-up real estate development and
- Redevelopment, otherwise known as renovation/remodelling.
However, each path has benefits and drawbacks associated with them. Considering the benefits and drawbacks of each, a real estate developer may decide to focus on one or do both. As a real estate developer, it is essential to evaluate the local real estate market and determine which approach is best to meet your target market’s needs.
GROUND-UP REAL ESTATE DEVELOPMENT
Ground-up real estate development can be defined as developing real estate from scratch. This path to real estate development starts with vacant land, and if there were any improvements on the land, the site has to be cleared to make room for the new structure that would be built.
Advantages of Ground-up Real Estate Development
- Ground-up real estate development offers unlimited flexibility to build your desired property.
- It allows for building customization.
Disadvantages of Ground-up Real Estate Development
- Obtaining the necessary approvals on vacant land makes it time-consuming.
- In the event, that there is an existing structure, the cost of demolition often makes a ground-up development very expensive.
Redevelopment as the name implies is developing what has already been developed. Say you have a building already but you wish to rebuild some of the structure’s components, this is what is called redevelopment. Unlike the ground-up real estate development, redevelopment doesn’t start from scratch.
Redevelopment is the process of upgrading and updating an existing building while leaving some or the majority of structural elements intact.
Advantages of Redevelopment
- It is a less expensive option when compared to ground-up developments.
- Redevelopment takes lesser time to complete.
Disadvantages of Redevelopment
- In redevelopment, there is no flexibility to follow new plans and create new designs. Adjustments should be compatible with the previous building plans else the purpose will be defeated.
- Permits for renovation /remodelling if needed are much easier to obtain.
At James Cubitt Developments (JCD), we develop buildings that are more than a structure but an expression of personalities. We are a leading real estate development company you can trust to help you improve your pieces of real estate to increase their value and meet your space needs.
Whether you are looking to build new structures or modify your existing ones, we bring our experiences and expertise to work in helping you create a satisfactory project. Let’s help you convert your building ideas to real property. For more information:
Phone number: +234 1 715 9995, +234 1 715 9996