Real estate is, undoubtedly, one of the most secure assets that you can invest in. Firstly, the land will never depreciate because it is a limited resource. Secondly, while the initial cost may seem high, the potential that it offers is much more valuable for the long term. Nonetheless, when looking to develop raw land, you may encounter several challenges if you do not know how best to go about this process. Therefore, not only should you have a professional construction contractor on your side, but you should also have some understanding on the process to avoid the risk of making major mistakes that will cost you a significant amount of money. To help you along, here is a brief beginners' guide on the initial steps that will go into a development project.
Step 1: Establish the fiscal feasibility of the project
Granted, land development is a great investment. Nevertheless, you should establish if the lots you are deliberating on will be lucrative enough to meet your financial expectations once development is complete. This stage is critical since it will help with eliminating any ambiguity over the returns your investment will offer as well as determining how much money you will need to siphon into the project.
One of the things to consider, for example, is how soon you will recoup your investment costs versus the initial amount of money you will be spending. Failure to establish the financial feasibility of the project can lead to unfortunate circumstances such as not being able to complete the development project since you did not determine what the overall costs would be.
Step 2: Determine an offer price
Once you begin establishing the fiscal feasibility of your land development project, you will also find out the various costs that you will bear for the project to be successful. Knowing these expenses in advance is important since it helps in determining if the asking price is fair or not. For instance, if your development expenses are estimated to equal the amount of the offer price, it is inadvisable to invest in that particular lot. When you have the right information, you can conclude if the asking price is reasonable and know how best to leverage your offer price.
Step 3: Verify the zoning laws
Before you put your money down, it is fundamental to find out what the local zoning laws are. Zoning laws will dictate the type of property that you can develop on the land, so not knowing what they are could render your finished building useless. By verifying the zoning laws, not only do you get to ascertain if a development project is permitted but the type of building you can develop since you get to know whether you are limited to multi-family houses, apartments and so on.
For more information on land development, reach out to a local contractor.