- Building residential properties from vacant lands can be profitable, with up to 25% returns.
- Researching local zoning and construction regulations is essential for success in real estate development.
- An experienced team of architects, contractors, property managers, and real estate agents should be assembled for any project.
- Creating an attractive living environment by improving the appearance of properties and offering customization options will help attract potential buyers.
Building residential properties from bought vacant lands has proved to be a highly profitable real estate business. Vacant land is typically cheaper than existing developed property, offering more significant opportunities for more affordable housing, which can attract buyers, investors, and renters.
The profits in this type of real estate business are considerable. According to the National Association of Realtors (NAR), vacant residential lands accounted for 30% of total home sales in July 2019, with the median sales price at $245,000—a 23% increase over July 2018. Furthermore, it’s estimated that an average commercial construction project will yield a return on investment of between 8-12%, while a residential project can pay a return of 20-25%.
However, you must learn the basics of developing land before pursuing this type of business. Here are a few steps to consider:
Understanding Zoning and Construction Regulations
Building real estate from purchased vacant land requires a deep understanding of construction and zoning laws. Knowing the local regulations for your area is essential for creating a successful project that meets all building codes and does not incur fines or other legal penalties. Additionally, every state has specific laws you must follow, so it’s important to research those before launching any project.
These regulations impact the design and development of your project in several ways. Zoning laws dictate what kind of property can be built in certain areas, including size and height restrictions, permitting needed for specific property uses, landscape requirements, and energy efficiency standards. Construction laws specify safety requirements and deadlines for completing projects that must be adhered to. Knowing these details in advance can help ensure everything is considered when designing the property.
Additionally, understanding these regulations can help you make more informed decisions about the project itself—for example, determining whether adding extra features or expanding the size of a structure will require additional permits or create an expensive change order down the line. It’s also essential to understand any existing easements on a parcel of land you may be considering purchasing, as they could limit what you are allowed to do with it in terms of construction or development down the road.
Creating a Construction Team
When taking on a residential development project, it’s essential to build a team of professionals that can help ensure the project is successful. While there are many different roles and specialties involved in developing land, some of the essential members of your team should include the following:
Architects
The primary role of an architect is to design structures and create blueprints that adhere to all local regulations and codes. They provide crucial input throughout the entire process, from concept through construction. It’s essential to select an experienced architect who understands the particular requirements of your area, has worked with similar projects before, and communicates well with other team members. You can find plenty of architecture companies that can handle the task for you.
Contractors
Contractors are responsible for building the structure according to plans created by architects. They must understand all applicable zoning laws and construction regulations in their area and have a robust network of subcontractors experienced in specific trades such as plumbing or electrical work. Researching contractors and interviewing them before selecting one is essential for ensuring they are qualified and meet any legal or safety requirements necessary to complete the project efficiently and on time.
Property Managers
Land developers need someone to manage their investment after completion—a job typically handled by a property manager. Their role includes overseeing tenant maintenance requests, collecting rent payments on time, advertising vacant units to keep occupancy rates high, handling tenant disputes or evictions if necessary, managing budgets associated with upkeep costs, and more. Property managers also come with specialized knowledge about local housing markets that can be invaluable when considering confident renovation choices or when to list available spaces for rent.
Real Estate Agents
Real estate agents serve several purposes in real estate development projects—from helping identify potential properties through their networks and fielding offers from interested buyers once the parcel is complete. Good real estate agents will also have established relationships with lenders who can provide financing options such as mortgages or refinancing once you are ready to close deals quickly with prospective buyers or investors. Working closely with an agent who knows your market well will help you maximize profits when selling or renting out properties you’ve developed.
Marketing Your Properties
When developing a residential property from purchased vacant land, it is essential to consider how to attract potential homebuyers. It is not enough to construct the property—measures must be in place to entice buyers and make them feel comfortable purchasing.
One of the critical elements for success in real estate development is to create an attractive living environment. This includes strategic landscaping, styling the exterior of your properties with neutral, modern tones and materials that appeal to a wide range of prospective buyers, and improving access to amenities like public transport and recreational activities. Additionally, offering features such as outdoor patios or decks or dedicated parking areas can help make your properties stand out against other options available.
In addition to improving appearances, offering potential buyers customization options helps make properties more desirable. That could include allowing customization of interior spaces with materials or finishes they choose or providing extra features such as solar panels or energy-efficient appliances. Offering these kinds of additional choices will help add value for prospective buyers and make them more likely to purchase the property.
Final Thoughts
Building real estate from purchased vacant lands is a profitable business model. However, it also requires considerable planning and research to create successful projects that maximize profits and return on investment. Understanding zoning and construction regulations, creating an experienced construction team, marketing your properties effectively, and offering customization options are all essential steps for making the venture successful. With proper planning and preparation, you can create attractive residential properties with appeal in any market.
