What is Real Estate?

Real estate is real property that consists of land and

improvements, which include buildings, fixtures, roads,
structures, and utility systems.

Property rights give a title of ownership to the land,

improvements, and natural resources
What is Real Estate Development?

“Real estate development is the process of creating value

by making tangible improvements to real property.” -Ben
Bulloch & John Sullivan

When you’re developing real estate, you’re either

building new structures, modifying existing ones, or
generally improving any piece of real estate to increase
its value.

Real estate includes land and temporary or permanent

structures occupying that land.
Types of Real Estate

There are several types of real estate, each with a

unique purpose and utility. The main categories are:
Land
Residential
Commercial
Industrial
#1 Land

Land is the baseline for all types of real property. Land

typically refers to undeveloped property and vacant
land. Developers acquire land and combine it with other
properties (called assembly) and rezone it so they can
increase the density and increase the value of the
property.
 
#2 Residential

Residential real estate consists of housing for

individuals, families, or groups of people. This is the
most common type of estate and is the asset class that
most people are familiar with. Within residential, there
are single-family homes, apartments, condominiums,
townhouses, and other types of living arrangements.
Examples of Real Estate

Now that we’ve outlined the four main categories, let’s explore
some specific examples of different types of real property.
Single-family dwelling – Any home designed for only one family
Multi-family dwelling – Any group of homes designed for more
than one family
Attached – Any unit that’s connected to another (not freestanding)
Apartment – An individual unit in a multi-unit building. The
boundaries of the apartment are generally defined by a perimeter
of locked or lockable doors. Often seen in multi-story apartment
buildings.
Multi-family house – Often seen in multi-story detached
buildings, where each floor is a separate apartment or unit.
#3 Commercial

Commercial property refers to land and buildings that are

used by businesses to carry out their operations. Examples
include shopping malls, individual stores, office buildings,
parking lots, medical centers, and hotels.
 
#4 Industrial

Industrial real estate refers to land and buildings that are

used by industrial businesses for activities such as factories,
mechanical productions, research and development,
construction, transportation, logistics, and warehousing.
Condominium (Condo) – A building with individual units
owned by individual people.
Detached house – A free-standing building not connecting
to anything else (a stereotypical “home”)
Portable house – Houses that can be moved on a flatbed
truck
Mobile home – A vehicle on wheels that has a permanent
residence attached to it
Villa – A building with only one room and typically a steep
pointy roof
Hut – A dwelling typically made of raw materials such as
bamboo, mud, and clay
Overview of Real Estate Industry

Let’s explore how the industry works and what the

major jobs and careers are. The real estate industry
can be divided into several different areas:
Development
Sales and marketing
Brokerage
Property management
Lending
Professional services (law, accounting, etc.)
#1 Development
Real estate development is a process that involves the
purchase of raw land, rezoning, construction and
renovation of buildings, and sale or lease of the finished
product to end users. Developers earn a profit by adding
value to the land (creating buildings or improvements,
rezoning, etc.) and taking the risk of financing a project.
Development firms create a new product, which can be
thought of as the “primary market” or generation of new
inventory.
#2 Sales and marketing

Sales and marketing firms work with developers to sell the

buildings and units they create. These firms earn a
commission for creating all marketing material and using
their sales agents to sell the inventory of completed units.
These firms typically focus on new units.
 
#3 Brokerage

A real estate brokerage is a firm that employs a team of real

state agents (realtors) who help facilitate a transaction
between the buyers and sellers of property. Their job is to
represent either party and help them achieve a purchase or
sale with the best possible terms.
#4 Property management

Property management firms help real estate owners rent out

the units in their buildings. Their jobs include collecting rent,
showing units, fixing deficiencies, performing repairs, and
managing tenants. They charge a fee, typically a
percentage of the rent, to property owners.
#5 Real estate lending

Lenders play a major role in the industry as virtually all

properties and developments use leverage (debt) to
finance their business. Lenders can include banks, credit
unions, private lenders, and government institutions.
#6 Professional services

There are a variety of real estate professionals who work in

the industry and help make it function. The most common
examples (other than the ones listed above) are accountants,
lawyers, interior designers, stagers (furnish properties for sale
in such a way as to enhance their attractiveness to potential
buyers.), general contractors, construction workers, and
trades people.
DEVELOPMENT STAGES
Pre-development will likely be one of the longest stages of the
real estate development process because you want to plan out
all your moves. Raise and address every issue you can, so you
can handle it before you start constructing.
PRE-DEVELOPMENT

Some of the common steps in

this phase include:
Market analysis and feasibility
studies
Securing a potential site
Environmental assessments and
Surveys
Concept Plans
Land or property acquisition
Site plans, development plans, and
building plans
Permitting
Some infrastructure improvements
(horizontal servicing)
Arranging construction financing
Branding & Marketing
Understanding Your Market
Like a farmer planting a seed, you want to ensure that you
choose fertile ground in which to grow your "crop." Different
markets will work for different investing strategies- for instance,
for more stable, but less lucrative returns you may want to invest
in more expensive markets with low-cap rates, for more risk and
more returns, you can look at less expensive secondary or even
tertiary areas with higher cap rates.

In most cases, you want to find markets with positive population

growth, a diverse employment base, and a well-educated
populace. Being close to urban cores or economic centers is
also a major plus.
"Take your time to do this phase well. Although you want to get
through it quickly to avoid excessive holding costs, you don’t
want to overlook something that will end up eroding your profit
margins.“

Before you give the construction team the order to proceed, you
should be confident that everything is ready to go. If you don’t
feel confident in your plans, keep planning or get a second
opinion from a trusted source.
CONSTRUCTION
Some of the common steps in this stage include:
Vertical construction
Project marketing
Draw review on construction financing
Pre-Sales and/or Leasing
Schedule Control
Quality Control
Project Accounting
Contractor Payment auditing
Arranging permanent financing (if not arranged during pre-
development)
Arranging for property manager (if not arranged during pre-
development)
As part of your monitoring, you should be asking questions like:
Are all regulations being followed?
Is everything up to code?
Is the team sticking to the budget?
Are things happening on schedule or not?
Whether you’re building a new development from the
ground up or renovating/modifying an existing building or
complex, you need to keep a close eye on what’s happening.
If you’re not knowledgeable enough to know when
something’s wrong, hire someone who is to keep track of
what’s happening on site. This is critical for ensuring the
building process goes smoothly and the crew is doing things
right.
Some activities during the
final stage include:
Ongoing marketing
Finding a buyer, if not done
earlier
Determining a hold strategy, if
not selling
Ramping up property
management
Construction completion
Document completion
Title registration
Closing of sales
Move-in day
Achieving stabilization
Post-Development
You have two main choices after construction is
complete. During the post-development stage, you can
either open the building for business to lease and
manage it, or you can sell it. Once you complete the
development project, you may also be able to use it as
collateral for a larger project loan.