Real Estate Development

HOW TO GAIN MORE FROM YOUR REAL ESTATE DEVELOPMENT?

Ahmad Khalaf - Latitude Developments - Ask Ahmad Khalaf - Strategic Real Estate Development Joint Venture Advisor

The REAL question is, how can you get more PROFITS out of your real estate development and investment activities?

You want success in real estate development.

You may have hired the best consultants, worked on a highest and best use study, and used every value engineering tactic available in the market.

Never the less, it does not seem to stop the DIMINISHING yields.

Even with the many marketing strategies out there; absorption and penetration rates are still DECREASING.

So how can you GAIN higher yields and better returns on your real estate development?

 

We need to answer a few questions here.

  1. WHAT REAL ESTATE DEVELOPMENT SHOULD WE CONSIDER TO MAKE HIGHER RETURNS?
  2. HOW SHOULD WE DEVELOP THIS PROJECT?
  3. HOW SHOULD WE MARKET AND SELL OUR REAL ESTATE DEVELOPMENT?

“THE MOST CRITICAL QUESTION TO ANSWER IN REAL ESTATE DEVELOPMENT IS WHAT SHOULD WE DEVELOP? WHEN WE GET THIS RIGHT, EVERYTHING ELSE THAT FOLLOWS WILL BE BUILT ON SOLID GROUNDS.” – Ahmad Khalaf

Lets Focus:

 

How are real estate development decisions made?

Some developers base their real estate development choices on mere aspirations. They may use brainstorming or other means to pass ideas and impressions around. They get excited about a particular concept; then they decide to go ahead.

Usually, the decision is “FOLLOW THE MARKET WITH A TWIST.”

Doing so will eventually lead to DISASTROUS CONSEQUENCES.

Developers who adopt this approach are at the mercy of the market.

They make money when the market goes up. Nevertheless, will be the first and biggest losers when markets switch direction.

Any development with no particular function and specific demand to fulfill WILL ONLY COST MORE TO BUILD.  Moreover, when markets cool down, it will attract the LEAST number of buyers and tenants.

We all witnessed this phenomenon over and over again.

Other developers, hire consultants to research the market and recommend an in-demand real estate development scheme.

 

Let’s look at consulting.

Leading real estate consultancy firms cover every sector in the market including residential, commercial, industrial, hospitality, entertainment, retail, healthcare, and education.

They will present to you their real estate development recommendations based on proper demand and supply analysis.

However, after you finish construction, you may very much end up in an entirely different position.

By that time, you could face an oversupply situation, which will reduce your absorption and penetration rates, and produce you lower rather than higher returns.

 

Why does this happen?

First, Real estate development is a 3 to 5-year process. By the time you deliver your project, you will be offering a similar product to all other developers who received the same recommendation as you did.

Second, markets are changing all the time. The speed of change is also accelerating. The last thing you want to do is to play catch up with the demand.

Third, all these real estate development recommendations use the same basic methodology, which is benchmarking the competition.

The problem with benchmarking is that you will end up doing what everybody else is doing.

We all noticed how most developers tend to move in the same direction at the same time. The fastest developer REAPS the fruits. The followers get the leftovers.

Even if the recommended project is delivering higher returns at this point; there is NO GUARANTEE it will continue to yield the same profits by the time you develop it.

The reality is that you will NEVER get outstanding results if you benchmark yourself to what the competition is doing.

 

So, how can you INCREASE your gains in real estate development?

To start with, I do not believe in creative brainstorming sessions as a decision-making tool.

Neither do I focus on benchmarking exercises to identify a potential development opportunity.

Despite the above, I’m still able to get AMAZING results like no one else.

Because I focus on a handful of tactics that DO move the needle.

 

Why?

Because if I start getting creative, I will be MISSING the point.

“IT IS NOT ABOUT WHAT THE DEVELOPER THINKS. RATHER, IT IS ABOUT WHAT THE MARKET WANTS.” − Ahmad Khalaf

Further, if I copy the competition, it will be nearly impossible to make MORE money.

“BIG MONEY IS IN CREATING YOUR OWN SPACES, NOT IN COMPETING IN OVER CROWDED MARKETS” − Ahmad Khalaf

Last, if I do not identify strong demand generators, I will not generate SUPERIOR GAINS.

“IF THE PROJECT IS NOT IN DEMAND, THEN IT IS NOT WORTH THE TROUBLE; BUT WHEN IT IS IN DEMAND THEN ALL THAT IT NEED IS TO BE REVEALED” – Ahmad Khalaf

 

So, Where do I focus my efforts to get the desired profitability results?

  1. I start by singling out hidden market gaps that the competition did not recognize yet.
  2. Then, I identify untapped demand generators which generate you higher yields.
  3. I follow by responding to new trends so that you can enjoy long-term growth.
  4. Based on the above, I answer with a matching real estate development project that satisfies the specific customer segment’s needs, aspirations, and expectations.
  5. From there I optimize your development cost by creating high levels of efficiencies across the development chain.

 

And, How did I create MORE VALUE?

A sizeable semi-government organization launched a massive mix-use real estate development project some ten years ago.

They were merely copying the trend at the time. In other words, they were benchmarking the competition.

The project miserably failed as it hit the wall by the end of the real estate frenzy.

Last year I was called by the chairman of the group. He showcased many creative ideas to relaunch the project.

To cut a long story short, I asked him for a chance to revisit the project.

Going forward, six months later, based on my recommended asset mix, the land appraisal went from $9.00 to $ 30.00 per square meter.

Three international consulting groups verified the before and after valuations based on my proposal.

YES That’s right, I increased the land value by 300% + in one year.

More, I achieved this massive increase WITHOUT spending a single dollar on creative designs, aggressive marketing or copying other developers.

Over and above, several investment funds showed interest in the project at the higher valuation! These are the same entities that refused to invest in the project at a lower entry point!

 

If you think that’s impressive, look at these results.

I  increased the value of an extensive portfolio owned by a powerful family office by 80%.

Here too, a leading international real estate advisory prepared the before and after valuations based on my recommended real estate development program.

Not only that, but the return on investment was 250%. That’s $2.5 return for every $1.00 spent.

This same group raised the needed funds based on my valuation. Financiers where happy to offer their money because they found more value in the prescribed development plan.

 

Not many people can say that.

However, do you know what’s even more difficult than working on large, long-term, multi-phased mix-use real estate developments?

It is creating above market value for an investor who insists you follow his decision on working in a specific sector!

In this particular case, I increased the expected IRR from 18% to 27%.

What did I do? I dug deeper within his chosen sector to single out a poorly serviced market segment.

Achieving these results is the main reason I love doing what I do.

 If you want to grow your business like the examples above, keep reading

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