Anyone familar with real estate – from brokers to homebuyers – are familiar with real estate developers. Not everyone knows what they do specifically, but many can name a famous developer or two – ever heard of Donald Trump?
Even though the name “real estate developer” seems pretty self explanatory there is quite a bit that developers do that most people aren’t aware of. People think of developers as the people (or company) that builds up the homes for sale. Those are the builders and contractors. Developers are the first step in the entire process of building any new land development.
What is a Real Estate Developer
Developers can be individuals, part of a partnership or LLC, and even as big as Corporations. One developer we talked to explained it this way: “my definition of a real estate developer is a businessman, an entrepreneur, who buys land then prepares it to be developed and constructed into a final project, depending on the needs of that project.”
There can be two types of developers. Land developers and building developers. Oftentimes, companies do both aspects of development. Land developers are the ones that actually buy the land, improve it – by making it suitable for buildings, including preparing for utilities, roads and leveling the ground. Land developers also work with municipalities to determine the covenants that define what can and cannot be done on the land. They also must receive legal permits to begin the actual improving and developing of the land.
Once the land is developed, the building developers commonly take over the rest of the process.
The building developers do just what their name implies: they oversee the process of building new construction and facilities on the land. These can be anything from residential homes, offices, commercial retail buildings. Any buidlings that are planned and being built on the developed land.
Obviously, land and building developers must work together closely to ensure everything goes as planned. Sometimes a buildings plans require a certain type of grading on the ground, and the land developers have to work with the building developers to make it happen. They also work closely to ensure covenants and permits are being followed.
Why Real Estate Development exists?
If you step back and look at it objectively, the amount of work and hassles one must go through to get a development project started seems overwhelming. The amount of work and money risk involved in real estate makes it seem not worth the trouble. Add to that the additional costs of the homes and estates, or commercial buildings on the land and you can see that it is a potential loss of a lot of money.
The main reason for real estate development to exist is summed up nicely by Gary Allen, a developer in North Carolina, “because it has to be done.” Homes and stores and offices need to be built. To be built the land needs to be developed. Simple as that. While there are certainly risks inherent in these projects, the returns can often be worth the risk. As long as developers research projects and land they’re developing and make decisions based on positive factors, such as location, amount of people and things to do in the area, and room for growth.
As long as developers make good, sound decisions they’ll make their money and people will have safe and secure neighborhoods and communities to live in.