The Three Most Important Parts of Real Estate Development
Feb 8, 2024
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Explore the appeal and profit of real estate development, the benefits over house flipping, insights from successful 84-unit deal, financing options, and the importance of construction costs, debt structure, and rental incomes for project success.
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Quick takeaways
Real estate development offers immense potential for economic growth by transforming land into thriving businesses and amenities.
Undertaking large-scale development projects provides advantages in terms of economies of scale and streamlining the process for more efficient outcomes.
Deep dives
The Appeal of Real Estate Development
Real estate development offers the opportunity to create significant value by transforming a piece of land into a thriving business. Whether it's building houses, hotels, or other amenities, the potential for economic growth is immense. The idea of taking a plot of land and turning it into a golf course community, for example, is captivating. By investing in the right homes, amenities, and businesses, the value of the land can skyrocket, potentially reaching billions of dollars. The process of developing and bringing an idea to life is addicting and offers ample opportunities for equity creation.
Advantages of Larger Development Deals
Undertaking large-scale development projects comes with several advantages. Rather than finding multiple individual deals for house flipping, a large development deal allows for economies of scale. By acquiring a single piece of land with multiple lots, it's possible to build and profit from a hundred or more deals in one transaction. While larger projects may take longer and require more resources, they offer more certainty than flipping houses, where hidden costs and unknown factors can arise. By focusing on developing communities rather than scattered properties, the process becomes streamlined and more efficient, minimizing logistical challenges.
A Case Study: An 84-Unit Apartment Complex
In a specific case study, the podcast episode highlights the successful development of an 84-unit apartment complex. The project began when a realtor friend discovered a piece of land with valuable potential. After negotiations, they acquired the land for $1.2 million. To determine the purchase price, they used the 10% rule, ensuring that the per-unit value of the land did not exceed $25,000. With the land secured, they began the due diligence process, forming a team and gathering investors. Ultimately, they raised $4.5 million in cash, with the remaining project cost of $19 million being covered by a bank loan. The project was completed within 24 months, generating $4 million of equity before closing.
Here are the three most important parts of real estate development that you'll need to master to be successful... --- Want to be coached by me on real estate investing? Join our Wealthy Investor program today at https://wealthyinvestor.com/podcast ---
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About Ryan Pineda:
Ryan Pineda has been in the real estate industry since 2010 and has invested in over $100,000,000 of real estate. He has completed over 700 flips and wholesales, and he owns over 650 rental units. As an entrepreneur, he has founded seven different businesses that have generated 7-8 figures of revenue.
Ryan has amassed over 2 million followers on social media a...
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