What do real estate developers analyze? Let’s see a brief summary of the main factors.
Urban developers know that one of the key points of your business is to choose a good plot. And the location has been and still is the main factor.
This post is based on an interesting article in Clarín ARQ by Inés Álvarez Search Sites for Real Estate Development.
That article is summarizes the overall approach to this business, but it also provides interesting information about local factors about financing and currency in Argentina, we highly recommend reading those ones in the original article.
Site key factors: the location and definition of the plot
The classic axiom still applies “location, location, location.” The choice of plot is the center of business, and there are several aspects to consider. But there are developers who know that there are other variables that come into play along with the location and that can change it all.
We could distinguish two kinds of developers based on weight given to the location factor.
On one side those business developers for who location is the key, and who usually seek exclusive land and opportunities in high value areas. For those it is important what value the location provides its development.
Other developers have a different approach. They put in perspective the location. And they tend to look in longer terms, and they also expect the new development to add value to the area.
Regardless of the approach in the short or long term, in all cases the purchase of sites is always analyzed from the perspective of an investment project. The key factors are logically:
- And price.
However, there are unavoidable factors such as:
- Real estate product,
- The target market,
- Potential demand,
- And estimated sales value.
Also we must address the critical factors that are associated with its technical realization:
- Urban indicators (zoning … )
- Available infrastructure,
- Potential construction,
- And construction features.
Other variables in the real estate business
But every developer always takes into account the context, the risks and opportunities:
- You should also consider what other developers are doing in the area, because studying thoroughly the offer will get you demand.
To find out if the land value is appropriate, it should be considered the type of product that it is to conduct. Rating a solar involves estimating the value of a potential asset.
- The real estate product must be well defined,
- Then it must be analyzed the project’s ability to withstand any impacts of the project and the cash: value of land, payments and inputs and returns.
And do not forget the importance of the payment of the plot. The interests and intentions of the owner of the site. Depending on his or her flexibility and payment requirements, a development project may be affected in its funding and cash flow. It can even be viable or not. The payment affects the risk of your investment.