Real Estate Development Policies And Procedures
Real estate development can be a profitable business venture provided you know the policies and procedures. |
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An experienced developer will be able to borrower the entire amount for the development project, but the same cannot be said for a new entrant. The risks associated with real estate development are high, and that is why to see the profits, a developer makes an effort to sell finished lots fast so that there is no time for the interest to build on the mortgage loan.
Here are some real estate development policies and procedures that every developer ought to follow.
Before starting any development project, you should first come up with a project idea based on the trends in the market. However, the idea should be such that there will be demand for it in the market and the developer should have the commitment to oversee all the stages of the development.
After that, the developer has to purchase the option for a piece of land. It goes without saying that the land has to be situated in a place where there will be high demand for the finished project. Also, take into account how the lot can be accessed, what are the zoning regulations and what is the layout of the land. Your intention to purchase should be based on all these criteria. Once you have zeroed on the land, you have to negotiate the price and purchase it. If you are using development mortgage, then you would have to carry out a market feasibility study before apply for the loan. In order to do a market feasibility study, you can hire a real estate expert.
Once you have the results of the market feasibility study, you can get your engineering and architectural team to come up with plans and specifications for the project. This will also help to come up with cost estimates to complete the project. Usually, developers keep aside 33 percent for land purchase, 33 percent for development and the balance 34 percent is taken as the profit of the developer.
Armed with the plans and specifications, you need to approach the proper zoning and planning authority. If any changes are to be done, they should be incorporated at this stage to save additional expenditure later on. This will also be the stage when the developer will approach a financial institute to get development loan.
Once the loan is approved, the developer would need to conduct a final market feasibility study, get the final plans and specifications into place and then come up with cost estimates that take into account direct and indirect expenses. Then the construction starts.
While the construction is going on, the developer should start his promotional and advertising campaigns. As the construction finishes, even if it is in stages, the developer should start his marketing.
In the marketing procedure, the developer has to keep track of all the purchases to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Any suspicious sale transaction should be immediately reported. The developer also has to maintain proper records of all the clients with their particulars in order to comply with the Act. There should be written compliance policies and procedures which should be overseen by a compliance officer. In addition, all staff and personnel handling sales should be given training on this aspect.
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