7 Biggest Mistakes Made by First Time Developers
Well, I would like to provide you with 7 Biggest Mistakes made by first time Developers and it is my hope that it will be helpful for you to know what to do and NOT to do.
# 1:
NO STRATEGY or PLANNING
Most people "do not plan to fail, they fail to plan". So, please do not go out and buy land because you think that it is a good development site. You need to do research and analysis on the land.
#2:
PAID too MUCH for the LAND
You make your profit when you BUY the land and preferably at or below market-rate. Market knowledge and good negotiating skills are a MUST.
#3:
POOR DUE DILIGENCE
Having a Comprehensive Due Diligence / Predevelopment Checklist is essential. Effective due diligence needs to include many aspects, such as Zoning/Land use, Market Analysis, Engineering, Conceptual Site Plan, Limited Appraisal, Financial Analysis, Funding Sources, just to name a few.
#4:
INCORRECT OWNERSHIP STRUCTURE
Different company structures will have different outcomes in taxes, such as income tax and capital gains tax. A CPA and an Attorney are very important to have work for you. They can save you money and head aches.
#5:
DIFFICULTY in OBTAINING FINANCE
Before you get started in real estate development it is necessary to know how much money ("skin in the game") that you can invest and what your borrowing capacity is. Otherwise, it may be difficult to garner any equity investors or debt financing.
#6:
NOT KNOWING What YOU Don't KNOW
If you do not know the Rules of the Development Game/Process, you will probably either get frustrated or lose money,if not both. It is best to hire a successful developer for your first couple of deals.
#7:
FAILURE to having an EXIT STRATEGY
You need to know how and when you may want to exit your project BEFORE you start your project. The best reason for an exit strategy is to plan how to optimize a good situation, rather than get out of a bad one.
Comments