Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Summary

As a general rule a ground-up construction project and a rehabilitation project is more difficult, more complicated, and more risky than a straight acquisition of an existing leased project. However, with risk there is usually more potential reward. Additional elements that you must be concerned with in a development or a rehab project include project feasibility, design, governmental approvals, and, of course, construction.

To assess a development or a rehabilitation project, start with a target yield, determine the project's estimated cost, pro forma income, and expenses at stabilized occupancy, and then work backward to find what you can afford to pay for the land in a ground-up development project or the project in a rehab transaction.

Be aware that decisions must be made constantly in a successful development or rehab project and therefore the developer's continuing involvement is crucial. Also communication is important to a successful project between the developer and the architect, the developer and the contractor, the contractor and the architect, and so on.