Bradley Ransome is the owner of Hatteras Holdings, LLC in Raleigh, NC. In the following article, Brad Ransome discusses why real estate development isn’t for the faint-hearted. With many challenges, such as market misreads, failure to risk assess correctly, and neighborhood opposition runs rampant throughout the industry.
Industry experts say that understanding these potential roadblocks can give developers peace of mind, allowing them to adequately prepare for obstacles before kickstarting their projects.
Misreading The Market Remains a Serious Challenge for Developers
According to real estate industry moguls, the saying “if you build it, they will come” shouldn’t apply to real estate developers. And yet, it remains a common and costly mistake among newbies.
Brad Ransome says that developers should analyze the market extensively before beginning projects, ensuring current needs drive their pursuits.
Well-established developers mention that they continually evaluate their trade area, the economy, employment, environmental factors, and educational aspects before starting a project.
Choosing The Wrong Location Plagues the Real Estate Development Industry
Location, Location, Location isn’t just a popular British TV show; it’s also a very well-known adage in the real estate world — and every successful developer should take note of it.
The best developments begin with the perfect site. Brad Ransome says that those who fail to situate their property effectively based on their primary demographics and target market won’t find the success they were hoping for.
Experts look at everything from environmental risks to accessibility to design to planned improvements to fees when deciding where to base their upcoming projects.
Neighborhood Opposition Set to Interfere with Real Estate Developments
Projects across the nation have rapidly derailed following residents’ doubts and pressure to stop proceedings. However, developers often underestimate the power of the people.
Reportedly, locals reject projects for many reasons, including fears of noise, traffic congestion, conflicts of interest, value misalignment, and the character of the area.
Bradley Ransome says to limit the likelihood of running into this project-stopping roadblock, developers should establish why people could oppose their project, conducting an outreach strategy to address all concerns effectively.
Accurately Risk Assessing Job Sites Clutters Developers’ Minds
Naturally, construction sites are risky places. So, developers must identify and evaluate them to accurately prepare safety plans and procedures.
Worryingly, the Occupational Safety and Health Administration (OSHA) reported that the fatal injury rate for the construction sector is higher than the country’s average for other industries.
Falls, trips, material handling, burns, vibration-related injuries, struck-by accidents, airborne exposure, and more can plague job sites. And while contractors are responsible for their own safety, the developer bears the brunt of the consequences if the worst occurs reports Bradley Ransome.
Thus, it’s perhaps one of the most important factors in project developers’ minds.
Failing to Acquire Approvals and Permits Stops Developments in Their Tracks
Obtaining planning approval from the relevant municipal office is one of the first hurdles. Without the go-ahead from officials, the project is non-existent.
Afterward, developers must acquire any and all associated permits, such as reconstruction, new construction, site movement, demolition, and alteration. Separate permits are also required for the installation, removal, alteration, or extension of plumbing, electrical, mechanical, and HVAC systems.
While such permits and approvals are relatively straightforward to acquire, there is always a risk of project delay or complete denial.
Bradley Ransome says that developers aiming to limit such headaches should begin the approval process early and communicate transparently with the local permit center, boosting their approval chances.
Running Over Budget Will Terrify Property Developers This Year
It’s no secret that real estate developments can be wonderfully lucrative. However, eye-popping profits can rapidly decrease if the project is more expensive than anticipated.
From ever-changing material and labor costs to unforeseen change orders and complications, budgets are consistently blown throughout the real estate development industry — and developers carry that risk on their own shoulders.
Brad Ransome reports that esteemed developers understand the risk of budget overruns, adding a 10% to 20% buffer to their plans to overcome unexpected situations with ease. Many even include an extra 10% or 15% for each stage of the project, accounting for inevitable labor or material delays.
Despite the Challenges, Real Estate Developers Can Prevail
With the right mindset and commitment to intricate planning, real estate developers can overcome the challenges facing the property development industry this year and make the profits they are hoping for. After all, the most successful developers are those who acknowledge, plan, and reduce such risks.