5 stages of real estate development
Like a manufactured product, a real estate project is part of a larger physical system programmed to achieve long-term objectives, but each real estate project is also a small business enterprise of its own. Thus, the development process is a continuum of construction technology, financing, marketing skills, administrative controls, and rehabilitation required to operate the real estate enterprise over many years.1
Many times, a real estate development project is a multilayered and complex venture with a lifecycle that encompasses several distinct efforts, ranging from land acquisition and improvement to vertical construction, building operation, renovation, and redevelopment. Each effort or stage in the process includes the assumption of varying degrees of risk with the potential of realizing commensurate levels of targeted return. In general, the risk/return potential can be higher in the first stage of development and decreases with each subsequent stage.
Infobrij stands out among other crowdfunding real estate platforms in the broad range of diversification options we offer through investment opportunities in nearly all stages of the real estate development process, each representing different risk/return profiles.
With over 100 years of combined real estate development and investment experience, the Infobrij leadership team has the practical knowledge and relationships to properly vet and help bring, to potentially successful outcomes, commercial real estate projects in the following stages of development.
During this stage, the developer often acquires a piece of unimproved raw land for the purpose of increasing its value. The desired outcome of this stage is a land improvement plan with all the regulatory and governmental body approvals and legal rights (entitlements) to improve the land for a particular use. This stage can and may represent a high risk/high return potential on a longer investment horizon. Learn more
Usually straightforward and with a shorter investment period, land improvement consists of meeting all the conditions of approval agreed upon during the development and entitlement stage, and performing the horizontal construction needed to get the land ready for building. Grading is performed to create building envelopes; streets, curbs and gutters are built, utilities are brought to the site, and a vested map and building-ready pads are delivered. Learn more
Stage 3: Product buildout
Product buildout is the stage that takes building-ready pads and constructs all the vertical structures needed to implement the improvements outlined in the development plans. This can often be the shortest duration stage, possibly benefiting from significant economies of scale achieved by building developers.
Stage 4: Real estate operations: purchasing and leasing
In this stage, a real estate operating company purchases and manages properties, most often office buildings, for the purpose of generating potential income streams via tenant lease agreements. The operating companies have the possibility of also benefiting from depreciation and potential upside when selling to other operating companies or value-add developers in the future. Infobrij does not feature projects in this stage of development.
Stage 5: Value added
In this stage, the value-added developer purchases a property that has sustained significant depreciation and is in need of maintenance, but has attributes that could possibly warrant investments in cosmetic and structural renovations, management improvements, and a repositioning in the marketplace. The value-added developer seeks to make the necessary repairs and upgrades, and to put more effective management in place to potentially increase the value of the property by making it more attractive to new and existing customers.
1. Stephen P. Jarchow, editor, “The Fundamentals of Real Estate Development,” James A. Graaskamp. Washington, DC: ULI The Urban Land Institute, 1981.