Real estate development is a potentially lucrative field for anyone looking to invest. It takes a great leader to become a developer, as collaborating, planning, and executing a build ultimately falls back on the developer. Before you commit to diving headfirst into the world of real estate development, read this article to find out what it really takes to start.
Part 1: Pre-Construction
Although most people think of construction when they think of development, there are actually several steps that come before it. You will need to acquire financing, find legal professionals, and search for a property. Builders and architects will need to draw up plans based off of the zoning laws of the township, and the land will need to be surveyed to ensure the integrity of the land. Beyond this, there will be tons of paperwork, many fees, and constant collaboration. You will need to know where you are with each member of your team at all times, as they may not talk to one another.
Unfortunately, many people underestimate the amount of time, effort, and money all of this takes. Some developers get partway through this process and realize they do not have the funds or mental capacity to deal with a project of this size. My advice: imagine how hard you think this will be and expect it to be 10 times harder, at least. Then, you can realistically decide if this is right for you.
Part 2: Construction
If you managed to get through all of the pre-building paperwork, it is now time to move on to construction. Any experienced developer will tell you to expect construction to take several months (or even years!) longer than you planned. Construction workers can run into all kinds of problems, such as delayed materials or hitting a ground pipe. Even more frustrating than the time delay can be the money problem. Any time your construction team runs into an issue, it can cost thousands of dollars. Make sure you have enough financing to cover anything that could arise and be prepared to be patient.
Part 3: Post-Construction
Once your new house or office building is completed, it is time to sell the property or rent it out. This process should be self-explanatory, but again, make sure to account for plenty of time between the end of construction and a finalized contract. This time will also cost you money, as the development loans will need to be repaid one way or another.
Although real estate development can be stressful, time-consuming, and even risky, it is ultimately a very rewarding process. Not only will you have made a (hopefully) lucrative investment, but you will have a major project to show for it. Still, before you decide to head into a new development project, make sure to carefully consider whether or not you are equipped to handle all three parts of a development project.
Investing is a tough subject to navigate because there are no certainties with investments. You could easily put every penny you have into an investment and lose it all instantly, so you should be careful about what to invest in. Although I can’t give investment advice, I would like to lay out the facts about the differences between various investments, including their risks.
Real estate is one of the safest things to invest in, as long as you can afford it long-term. You may buy several properties with the hopes of renting them out, only to find that nobody in your area is looking to rent. Or, you may find damage to your property that could cost thousands of dollars to repair. Buying real estate is a hard asset, though, so you are extremely unlikely to lose everything unless your property gets foreclosed.
Stocks are risky because you can never predict what a company will do in the future. For example, a new product could tank, or there could be a scandal against the CEO. Sometimes, stocks drop just because an “expert” decides it’s time to sell. Still, many people make a living from trading stocks, so keep in mind that great risk can lead to great rewards.
Mutual funds are like stocks, except you only put pennies into each. A mutual fund can tank, but it is highly unlikely that you will lose all of your money right away. Likewise, you are unlikely to gain money rapidly.
Investing in a startup is fun and exciting, but like the stock market, it is incredibly risky. Most companies do not make it long-term, so you should be absolutely sure of success before diving in. Or, you should at least be comfortable with high risk.
Cryptocurrencies are the new stock market in many ways. They are extremely volatile, as evidenced by Bitcoin’s rise and fall. While you may be safer with lower-priced altcoins, there is no guarantee, so be careful with your investments and watch prices constantly to ensure you don’t lose everything you have.
Overall, investments are risky and can lead to devastating consequences if you are not careful. Do your research on any investment vehicle you are considering, including historical data and future projections. And keep in mind that even Warren Buffett loses investments, so if it can happen to him, it can certainly happen to you.
The first step to investing is to save. Saving is essential, primarily when investing in high-risk properties. There is always the possibility of losing your money, or a tragic event occurring, which requires a substantial amount of money. If you can manage to build up an emergency fund, you won’t have to worry as much about the possibility of your investments tanking.
Next, you want to determine your investment goals. There are a few factors to consider:
- How long do you want to invest? Some investments may require your money to be tied up for long periods of time, while others are more open-ended, although many times the longer you invest, the higher the return.
- How much risk are you willing to take? Investing in the stock market is the riskiest option, but can lead to significant returns. CDs have little-to-no risk, but their gains are minimal. If you’re not sure where to start, consult a professional or place more emphasis on the other points.
- How much attention do you want to give? Real estate and the stock market are two needy investments. If you have no time to spare, consider investing in a product with a steady rate. That way, you won’t be surprised by your returns.
- How much money do you have available? I’m not merely talking income, as with real estate you can get a mortgage. It is essential to understand the total amount of money you have to put toward investments, and do not bite off more than you can chew. That being said, if your budget is tight, consider investing using an app, such as Acorns or Robinhood. These apps are marketed toward those looking to get started in the stock market but don’t want to place hundreds of dollars in.
After you’ve determined your goals, look into the different options available to you. Make sure to consider possibilities outside of your comfort zone. You may find a choice you haven’t heard of, and it could lead to great success. For now, let’s look at a few investment options:
- CDs – These are time-deposits backs by banks. You make an Annual Percentage Yield (APY) off of them, but your money is stuck in the account until the period is up, which can be a few months or a few years. Closing the account ahead of time can result in costly fees, so if you’re strapped for cash, CDs may not be the right option.
- Roth IRAs – “Save for retirement while you’re young!” says every parent. It is important to think about your future, and even though retirement may be many years away, investing in it now will help you worry less later. Plus, one of the benefits of a Roth IRA is you pay the tax on your money upfront, so you can withdraw your money later without paying any taxes on it. However, just like CDs, IRAs tie your money up for years.
- Stocks – Stocks are one of the riskiest investments you can make. However, people have made more than enough to survive on stocks alone. If you’re interested in watching the stock market, look into buying a few inexpensive stocks to start.
- Mutual Funds – Like stocks, mutual funds invest in the stock market. The difference is, mutual funds spread out your investment, so even if one stock tanks, you can still make money.
- Real Estate – If you are hands-on, or are interested in managing tenants, real estate may be an option for you. It can be incredibly lucrative, and there are tons of ways you can be a real estate investor, from flipping houses to being a commercial landlord.
- Cryptocurrency – A new and innovative form of payment is cryptocurrency. If you’re skeptical about the banking system or want to buy into cutting-edge fintech, check out the various kinds of cryptocurrency, including Bitcoin.
No matter how you decide to invest, there are two things you should always do: research options and talk to a financial advisor. In no time you’ll be making your first investment!
Originally posted on RomeoDiBattistaJr.me