Real Estate
Developers
Private
sector real estate development in the United States of America is most
often a risky entrepreneurial activity. This is because it often tends to
be highly financially leveraged, with lenders often requiring personal
guarantees from the part of the developers. In other words, it is the
personal net worth that is pledged as collateral for the loans.
Developers believe that the potential
profit justifies the risk of default. The only prerequisites for those
aspiring to be developers are the ability to tolerate risk and liquid
capital. It has been seen that it usually are second and third generation
developers that have these attributes in the most advantageous form. They
usually have required mammoth capital and an inherited in depth
understanding of the industry. However, in the United States of America,
the liberal economy gives almost anybody the strength to compete, and
those that make the plunge and accept the challenge are usually from
closely related businesses like brokerage, construction, design or
finance. It is only recently that the academic community has begun to
acknowledge the fact that real estate development is a legitimate
discipline deserving investigation. It largely remains debated as to
whether academic training specific to this field would yield success.
It is also important to note the contributions
attorneys have made in this field owing to the fact that a significant
percentage of developers come from legal backgrounds. They being equipped
with critical analytical skills, bureaucracy navigational skills, and
insider information obtained from consulting; all seem to help them in
development endeavors. For entry level young adults into the field of real
estate development, the credentials that real estate development firms
value the most are dual master's degrees from prestigious universities of
the world in business administration and in law.
Building developers
Building developers usually acquire raw land,
improved land, and / or re-developable land in order to construct building
projects. Thereafter, the buildings are sold as a whole or in part to
others (after ensuring a significant profit), or retained as assets in
order to produce incoming cash flow via rents and other means. Some
building developers even have their own internal departments to take care
of design and construction of buildings - this is more common among
smaller developers;
while some others sub-contract these parts of the work to third parties -
seen usually in larger developers.
Land developers
Land developers
generally acquire raw land (real property with no scope for improvement or
infrastructure) and improve it by providing utility connections, roads,
earth grading, covenants, entitlements etc. Infrastructure improvement
provides the base on which further development of built improvements can
be considered. Covenants define the context in which future development,
if any, of built improvements could by incorporated (often in the form of
deed restrictions on particular parcels only limited to the properties in
question). Entitlements are legal permissions secured from regulatory
bodies (usually in the form of permits, but otherwise in the form of
re-zoning or planned unit developments). Once these improvements have been
made to the raw land, it is typically subdivided and sold in smaller
divisions to building developers or individuals, after ensuring a profit
margin.
Real estate developers
A real estate developer (American English) or property developer (British
English) makes positive improvisations of some sort or the other
to property in question, in a bid to increase
its value. The developer could well be an individual, but is more often a
corporation, partnership or limited liability company. There generally are two major
categories into which real estate development activity is classified: Land development and
Building development (also sometimes known as project development).
