How to Become a Land Developer
They must be able to look at a piece of undeveloped land and imagine what it might become.
They are different than builders or contractors who manage construction details.
The first step in becoming a land developer is finding a parcel of land.
The developer's concept of the project must make sense.
Putting up a strip mall in the middle of a corn field, for example, may not be practical, but building a commercial or residential project on the edge of similar developments can be very profitable.
Identifying a parcel of land involves more than just imagining homes or commercial buildings.
A successful developer must review possible roadblocks to the project.
Is the land too steep or wet for building? How will sewage and water be managed? Is it reasonable that a city or other municipality would make an infrastructure investment to build streets, sidewalks and curbs? When the land is identified and the concept begins to take shape, the next step is figuring out how to acquire the land.
Financing a project often is the most difficult stage for a new developer.
Some developers start out with inherited or family owned land.
The son or daughter of a farmer with land near other developments, for example, is in a good position to become a developer.
Most developers buy land with private investments, bank loans and their own cash.
Before backing a project, bankers and investors must be convinced both of its soundness and the developer's ability to complete it successfully.
A developer with a track record of other successful developments has a better chance of persuading investors or banks to risk their money than a developer just starting out.
That's why beginning developers should start with small projects that don't require huge investments and can be accomplished without a lot of obstacles.
Building a duplex or a couple of houses, for example, is a lot less expensive and risky than a 400-lot subdivision.
A beginning developer can gain the confidence of investors by financing the bulk of the project themselves.
The developer also can show commitment to the profession by earning a master's degree in business administration or other related college degree.
But the most important factor in persuading investors is to have a good plan that provides a strong chance for them to earn a profit.
Hiring a professional to draw up detailed plans for the project can help gain the confidence of investors.
Most projects require government approval to re-zone the land, for example, from rural to urban or for a subdivision plat.
A detailed plan also is important here because plan commissioners or other officials will want to examine the project's impact on the neighborhood in areas such as traffic, noise or environmental concerns.
Sometimes approvals come only after long delays, negotiations or initial rejection.
Developers also need to work with planners to determine whether the city will help build streets, sidewalks and curbs.
Many cities finance the cost of these improvements by with tax-incremental financing.
To reduce the risk that a project will not be approved, developers often buy an option on land by paying a fraction of the full price.
Options often specify that the developer is not bound to purchase the land if the approvals don't succeed.
When the governing bodies have approved the project, it's time to start construction.
The developer selects a contractor by soliciting bids from companies capable of managing the project by hiring subcontractors for specific parts of the job like structural, electrical and plumbing.
For large residential subdivisions or industrial parks, developers often build the project in phases so they can reduce the risk if the market is slow and homes or commercial buildings can't be sold or rented quickly.
Marketing the project is the final phase, although it must be started long before the first shovel of earth is turned.
The developer must find buyers of the new homes or commercial buildings.
Several factors, including the strength of the local real estate market, determine how successful the marketing will be.
Success is a validation of the developer's initial vision of the project and attention to the crucial details along the way.