How do real estate developers make money

Do​ ​You​ ​Know​ ​How​ ​Do​ ​Real​ ​Estate​ ​Developers​ ​Make​ ​Money?

Making​ ​money​ ​in​ ​real​ ​estate​ ​is​ ​not​ ​an​ ​easy​ ​task.​ ​But​ ​if​ ​you​ ​ask​ ​or​ ​take​ ​help​ ​from​ ​the​ ​best realtors​​ ​they​ ​can​ ​ease​ ​this​ ​difficult​ ​task​ ​for​ ​you.​ ​As​ ​there​ ​are​ ​various​ ​properties​ ​involved​ ​in real​ ​estate​ ​business​ ​so​ ​the​ ​choices​ ​to​ ​make​ ​money​ ​are​ ​also​ ​varied.​ ​The​ ​real​ ​estate developers​ ​purchase​ ​raw​ ​(undeveloped)​ ​land,​ ​establish​ ​the​ ​infrastructure​ ​(roads,​ ​water, sewer,​ ​power​ ​etc)​ ​and​ ​amenities​ ​such​ ​as​ ​recreation,​ ​community​ ​centers,​ ​etc​ ​then​ ​sell​ ​on higher​ ​margins​ ​to​ ​different​ ​investors.​ ​They​ ​also​ ​purchase​ ​the​ ​land​ ​and​ ​hold​ ​for​ ​the appreciation​ ​or​ ​increase​ ​its​ ​value​ ​then​ ​sell​ ​out.

They​ ​also​ ​build​ ​buildings​ ​(commercial,​ ​industrial,​ ​residential)​ ​then​ ​sell​ ​the​ ​finished​ ​product to​ ​end​ ​buyers.

Ways​ ​to​ ​make​ ​money:Appreciation:​ ​It​ ​is​ ​the​ ​most​ ​common​ ​and​ ​traditional​ ​way​ ​to​ ​make​ ​money​ ​in​ ​real​ ​estate.​ ​It can​ ​be​ ​performed​ ​in​ ​various​ ​ways​ ​on​ ​different​ ​types​ ​of​ ​properties.​ ​Return​ ​on​ ​investment can​ ​be​ ​increased​ ​in​ ​lots​ ​of​ ​ways.

Raw​ ​Land:​​ ​one​ ​of​ ​the​ ​most​ ​common​ ​ways​ ​to​ ​purchase​ ​a​ ​undeveloped​ ​land​ ​used​ ​in​ ​a appreciation.​ ​Appreciation​ ​on​ ​raw​ ​land​ ​can​ ​be​ ​achieved​ ​through: Real​ ​estate​ ​developers’​ ​purchases​ ​lands,​ ​build​ ​houses​ ​that​ ​raise​ ​the​ ​value​ ​of​ ​land​ ​even further.

They​ ​purchase​ ​real​ ​land​ ​for​ ​discoveries​ ​of​ ​valuable​ ​minerals​ ​or​ ​other​ ​valuable​ ​commodities on​ ​it.​ ​Any​ ​appreciation​ ​generates​ ​from​ ​this​ ​goes​ ​into​ ​the​ ​pocket​ ​of​ ​developers​ ​as developers​ ​hold​ ​rights​ ​for​ ​the​ ​property.

Residential​ ​Property:​​ ​it​ ​is​ ​also​ ​effective​ ​money​ ​generating​ ​method​ ​employed​ ​by​ ​real estate​ ​developers.​ ​To​ ​transform​ ​any​ ​investment​ ​into​ ​profit​ ​results​ ​plenty​ ​of​ ​factors​ ​you need​ ​to​ ​consider.​ ​For​ ​example,​ ​location​ ​is​ ​one​ ​of​ ​the​ ​main​ ​factors​ ​that​ ​play​ ​the​ ​very important​ ​role​ ​in​ ​appreciation.​ ​As​ ​the​ ​neighborhood​ ​around​ ​a​ ​home​ ​evolves,​ ​adding​ ​transit routes,​ ​schools,​ ​shopping​ ​centers,​ ​playgrounds​ ​and​ ​so​ ​on,​ ​the​ ​value​ ​climbs.​ ​Apart​ ​from purchasing​ ​properties,​ ​home​ ​renovation​ ​and​ ​improvements​ ​can​ ​also​ ​encourage appreciation.​ ​In​ ​order​ ​to​ ​increase​ ​the​ ​home​ ​value,​ ​we​ ​have​ ​several​ ​ways:​ ​remodeling kitchen,​ ​dining​ ​area,​ ​landscape,​ ​putting​ ​in​ ​an​ ​extra​ ​bathroom​ ​or​ ​room,​ ​heating​ ​a​ ​garage​ ​and many​ ​more.​ ​Many​ ​of​ ​these​ ​techniques​ ​have​ ​been​ ​developed​ ​by​ ​property​ ​flippers​ ​who specialize​ ​in​ ​adding​ ​high-return​ ​fixes​ ​to​ ​houses​ ​in​ ​a​ ​short​ ​time.

Commercial​ ​Property:​​ ​is​ ​also​ ​in​ ​high​ ​demand​ ​to​ ​make​ ​money.​ ​Like​ ​raw​ ​land​ ​and residential​ ​real​ ​estate,​ ​ROI​ ​on​ ​commercial​ ​properties​ ​also​ ​depends​ ​on​ ​the​ ​location​ ​and developments.

Income:​​ ​second​ ​most​ ​profiting​ ​way​ ​to​ ​generate​ ​money​ ​is​ ​a​ ​regular​ ​income.

Raw​ ​Land​ ​Income:​ ​you​ ​can​ ​earn​ ​royalties​ ​or​ ​regular​ ​income​ ​for​ ​any​ ​discovery.​ ​It​ ​includes pump​ ​jacks,​ ​pipelines,​ ​gravel​ ​pits,​ ​access​ ​roads,​ ​and​ ​cell​ ​towers​ ​and​ ​so​ ​on.​ ​Raw​ ​land​ ​can also​ ​be​ ​rented​ ​for​ ​production,​ ​usually​ ​agricultural​ ​production.

Residential​ ​Property​ ​Income:​​ ​regular​ ​income​ ​on​ ​residential​ ​as​ ​well​ ​as​ ​the​ ​commercial property​ ​comes​ ​as​ ​a​ ​rent.​ ​Rental​ ​income​ ​is​ ​the​ ​great,​ ​easiest​ ​and​ ​popular​ ​way​ ​to​ ​generate income​ ​from​ ​your​ ​investment.​ ​However,​ ​it​ ​also​ ​involves​ ​plenty​ ​of​ ​task​ ​and​ ​headaches.​ ​Hire a​ ​top​ ​real​ ​estate​ ​brokers​​ ​who​ ​have​ ​specialization​ ​in​ ​handling​ ​rental​ ​properties​ ​can​ ​ease​ ​up for​ ​you.

Real​ ​estate​ ​investment​ ​trusts​ ​(REIT),​ ​Mortgage-Backed​ ​Securities​ ​(MBS)​ ​and​ ​Mortgage Investment​ ​Corporations​ ​(MIC)​ ​are​ ​also​ ​good​ ​ways​ ​for​ ​deriving​ ​real​ ​estate​ ​income.​ ​So​ ​these are​ ​the​ ​ways​ ​how​ ​real​ ​estate​ ​developers​ ​make​ ​money.​ ​The​ ​developer’s​ ​profit​ ​margin depends​ ​on​ ​the​ ​sale​ ​price​ ​of​ ​finished​ ​goods​ ​and​ ​the​ ​total​ ​cost​ ​incurred​ ​in​ ​the​ ​development.

According​ ​to​ ​the​ ​survey,​ ​builders'​ ​net​ ​profit​ ​averaged​ ​5.9​ ​percent.

Source​:​ ​http://toprealtorsusa.hatenablog.com/entry/real-estate-developers-make-money