If you want to invest in real estate, you need to know the different types of real estate development, their pros and cons to make a sound decision.
This article will help you understand the different types of real estate development:
This refers to an undeveloped land which is either used for agriculture, landscape design or left to develop naturally in a rural area or in a city. These type of real estate developments can be open fields which are unfenced or urban lots or restricted properties which are not supposed to be trespassed.
This refers to a land which have been used previously, industrial areas or commercial facilities that need to be upgraded. These developments require less amount of money because there is an existing infrastructure. In addition, the developments take less time because planning and permissions are easy to get.
In subdivision, a single piece of land is divided into smaller pieces or lots that are then developed by erecting buildings and then sold separately. In order for subdivision to be effective, land development potential must be carefully evaluated considering all possible factors that may affect profits e.g. location, development permissions, local market conditions and cost of developing the land. Finally, in subdivision real estate development, experienced investors and developers partner up to maximize return on investment (ROI) and success rate.
This type of real estate development is mainly used for living purposes. When land is developed as residential, a number of factors must be considered to ensure that it attracts potential homeowners. For instance, availability of soil amenities and security are prime factors to determine development of a piece of land. One benefit of residential real estate development is that they are easy to sell under normal market conditions because people are looking to settle down. However, developing a piece of land in a wrong area or at a wrong time might be very risky and costly.
These are buildings or land that is developed to generate profit from either capital gain and/or rental income. This type of development is usually down around towns and major cities because they have high return on investment. Normally, the businesses that rent in commercial real estate usually lease the space for a given period of time. The developer or investor owns the buildings and is entitled to collect rent from each business that operates from his or her buildings.
Repositioning and re-development:
These type of real estate developments have numerous advantages that new real estate developments do not have! Each repositioning and re-development project is different but they use an existing structure, develop it into something new and then earn income from the developments. This type of development projects can save construction cost and time required while still adding value to the existing building.
These are developments used for manufacturing and production. The land is cheaper but the total cost will depend with location and market conditions at the time. After development, the investor benefits from a long-term tenant because an industry does not relocate often.