Don’t Make this Mistake | 3 Ways to Construct Real Estate NOW
So if you’re working on a large construction project, what are some of the key misconceptions that people make that get them ruined? Because there’s several missteps that ma most people face when they’re working on these projects. So the first one, and you wanna make sure you stick to the end so that the entire video will make sense, is some people they market to the wrong, I guess they’re overconfidence and they market to the wrong audience because let’s say that I’m working on building like a bunch of office buildings, or I’m working on building a film studio or something like that, and I don’t have any.
Like I say that, oh, the, the project is like a $200 million project. Like there’re, so there are like probably eight different versions of there, probably like they’re five different versions of that. So if you tell somebody that you’re working on building a, working on a construction project and then you tell them that it’s a $200 million project, you know, they’re different phases in how the project can get done because some people are saying this and then the adults own the land. (ways to make money with real estate)
They haven’t built anything. They haven’t rezoned anything. They haven’t started construction and they haven’t split the construction up into phases and then they haven’t gotten people that prove that they’ll be a demand for the thing that they’re looking to build. That’s probably the worst phase of everything is when you’re looking at buying land and you don’t even own it.
And the land is like a niche piece of land, and that’s really the worst case. So sometimes it’s best to say it. Like there’s no even point in my opinion, saying things like that, like you’re working on a 200 million project before there’s anything done, because it has just led to disappointments and it’s best just to phase things out and have a specific phase for each part of the capital rate.
So for example, let’s say that you’re working on building a bunch of office spaces and you don’t own the land. Then really 90% of the time you just wanna focus on first getting that piece of land. Then after you own a piece of land, then you have to put a bunch of money into the land so that free, so you’re free to rezone it. (ways to make money with real estate)
So that zoning, just for those who don’t know, has just changed the land such that change it so that you’re allowed to build the thing that you’re looking to build on it. And so it costs money and it takes time. So you can have one CAPA raise for the rezoning, and then the value line can actually go up.
And then after that, then you can look at doing things like, then you can look at construction, and then that’s like another thing they have to do. And then after construction is finished, then you can look at stabilizing the asset and making sure that you have enough demand in the asset. And then there’s low vacancy rates.
And so on. So those are pretty important phases. So the point I’m making is, yeah, like you can combine everything into one, but you have to understand that it’s a very long process and you have to make sure. Yeah. And you understand that the investors that will come at the beginning of the project, May be different than the investors that come at the end of the project.
So, you know, rather than saying, Hey, this is like a 200 million project, when you count the entire value of the project, that may take 10 years plus you can just say, Hey, this is, you know, this is this phase of this large project. Just so you can get the right investors in at the right time. So that’s the first step. (ways to make money with real estate)
The second thing is if the land is shovel ready and you already own the land, you’re probably 99.9% way better off than someone who doesn’t, because if you haven’t, if you don’t own the land already and the land is, is not underneath your control, and it’s not free and clear, it just adds some like way more risk.
And not only that, if the land isn’t something called shovel ready, meaning that it’s ready to be built, it just drastically increases the difficulty in getting a deal done. So just to set expectations right now, if you’re looking to do a construction project, You know, just make sure that it’s shovel ready and you know, there’s no zoning risk, no permanent risk, and no licensing risk unless you only target investors that you want to sell the land to afterwards. (ways to make money with real estate)
So that’s the second thing. And then the third thing is try not to be too niche. There are many construction projects where people are looking to build something and then they look for equipment, or they look for something that is so niche and so specific that the amount of investors that understand what you’re doing is so small that you just shoot yourself in the foot.
For example, if you’re taking, like if you’re just looking to build housing, You’re looking to build apartments, that’s probably the lowest hanging fruit because everybody needs a place to live. There’s always gonna be demand for that if you, you market it, right, but if you’re looking to build like a beryllium factory or like you’re looking to take a tire burning factory and then reestablish it and rebuild it in a certain, for a niche application that turns into recycled plastic, that gets turned into, you know, rubber pellets that gets turned into glass.
Like if you, you know, all those. Crazy cases where you’re, you’re building a really customized factory for a very custom case that’s really, for a custom situation, a custom type of customer. That stuff is very niche and it just, it, it just takes so much work compared to, oh, I’m building, I’m building now. (ways to make money with real estate)
It’s a, like, I’m building a car wash or I’m building a, a office building. You know, so usually the real estates that is residential is low hanging. Fruits and then after that, then going into different types of commercial real estate is, is a bit more easy. But then the types of commercial real estate that are super niche can get into a place where you can’t really find investors for a niche that is too specific.
So, you know, just be careful when you start going looking to build a construction project for a very special niche situation that you don’t know if anyone is going to even understand what it is. So with those three things, that’s pretty much the summary and those are the three things I’d recommend. So basically, number one, you know, make sure that you just. (ways to make money with real estate)
Phase your project out and don’t talk about the entire project as if it’s like one check that’ll write the entire project. Understand that you just wanna focus on the phases and then, you know, make sure that you try to get into it. I guess the biggest phases are before you own the land and rezone it and show up ready.
Then after. The land is owned and shovel ready. Shovel ready just means that the shovels are ready to construct the land. It’s ready to be built. And then the last thing is try to make sure that you know you, you don’t go into a situation that is so niche that nobody would under understand what it is, and then the amount of education that goes up front is so high that you wouldn’t even understand what you’re doing.
So with those three things, That’s pretty much what I’d recommend, and if you’re looking to get some help in actually creating a fund to acquire, you know, these types of businesses or these types of pieces of land, so you can construct your deals on them, make sure you head to. (ways to make money with real estate)