Who doesn't want to make more money and make their processes more efficient? In this post, we will explore 5 different ways that real estate developers can make more money. Let's have some fun!
- Ask your architect whether they use CAD or BIM
You can call me the anti-christ of CAD. Attention all people in the real estate industry! We are assembling buildings here and not LEGO sets -- even those come with instructions and 3D visuals. If as a developer, your design team is not using Revit or some sort of 3D BIM technology, you are losing money. I typically tell students the same thing when applying to a firm. Turn around and walk back out when they tell you “We are a CAD based company.” You are wasting time and paying for an outdated service. The use of CAD in architecture is just about dead. CAD still works, just like that old CB radio your weird uncle has in the attic, but you’d rather use Snapchat to communicate because it’s way better.
Our firm has specifically been engaged to help CAD based firms utilize a BIM technology to win and take on projects. As the developer, utilizing the latest technology will save you from unrealistic bids, contractor errors, and non coordinated designs. We have helped clients understand where they designed duct runs, and showed conflicts in the computer that would have costed thousands on the job site. Do you think Honda just throws together a car in their factory? The answer is no. Every part of the car is designed in a virtual computer model utilizing the latest in 3D technologies and then is sent to the factory floor for assembly. Why should building a house or apartment building be any different?
- Pay to have an Architectural Feasibility Study
Many times a real estate developer may buy a piece of land without realizing the full potential of the project. Therefore, it is very important to have a feasibility study complete by a design professional. Our company has found developers millions of dollars of project potential by having us complete a $2000 feasibility study. There was one case where we found a developer an extra 650 square feet in a project with an ARV of $250 per square foot for a total of $162,000 found project potential. Our fee was $3500. That is one hell of an ROI.
Some extra money can be found with unique green building codes. One specific building code to the city of Philadelphia allows for more units, if you put a green roof on 60% of your building. We were able to find one specific developer an extra $600,000 in project potential by just figuring out he could add another 5 units to his building. Us designers can pay for ourselves with just a conversation. That clients cost was $0. He then engaged us to develop a complete study to determine the best egress, and parking on the site.
Another way to save money is to allow your designer to think! Let him do a study ahead of time to work out what the max amount of potential is for you site. The developer should stick to the numbers and let the designer determine the best layout to fit within those parameters. During the building feasibility study, you will be able to understand the egress on the site along with a rough schematic layout of units. Typically these feasibility studies range from $1000 to $5000 depending on the size of your project.
- Spend that Money, on a design professional.
Spend money on the Design! There is nothing worse than a poorly planned building with little or no thought. Pay your designer to do their job. You get what you pay for. Want me to pick up your phone every time you call? Pay me a fair rate. It cracks me up when a developer or builder is willing to pay $350 an hour for a zoning attorney that couldn’t draw out a flashing detail that will prevent their building from leaking and causing law suits. But they have no problem knocking down the architect’s fee just so they can maintain budget and try to make another dollar.
This scenario isn’t every builder or developer, but I personally have run into a few myself who I won’t work with again because of their antics when it comes to valuing a design firm. When a client tries to knock down our firm for $1000 or less, you can already assume that we aren’t friends and probably won’t work together. So the moral of the story to all developers is to make sure to pay your design team. “Thinking is one of the hardest things to do, which is why so few choose to do it.” -Henry Ford. So pay your architect to think about your project because you will make you more money in the end.
- Pre-Sell and Lease your properties before putting a shovel in the ground
We have seen numerous times where developers wait until the project is complete to try and sell. This is an age proven method, but has become extremely outdated in the realm of technology. The developers who are killing it right now are those developers who are pre-selling 50% or more of their construction before a shovel hits the ground.
By utilizing the latest in 3D technology you are now able to set up Virtual Design Center instead of a real one. Imagine a time where a home buyer or company can know exactly what their new space will look like before they go through construction, it’s a game changer! And this occurs typically on a tablet or smartphone device. You are also able to switch out options for developers with customizable upgrades such as cabinet styles or appliance packages. You then take all of these pretty 3D renderings, and package them into a website. This is where you can track visits, contact info, create optimized content, and do targeted social media spends to attract buyers or potential tenants before you building is built.
- Develop a “Punch Out” checklist for your new construction or renovation project
There is nothing more important than getting your final new construction or renovation building ready for someone to occupy. One of the biggest hurdles I have seen for developers is getting their buildings 100% complete, not 99.2% complete. Develop a checklist to do a final punch out with your subcontractors. If you are a 1 man shop and flipping houses, then make it for yourself. Create a checklist that goes over every area of the job. From door stops, to paint touch ups, you must create a list that can be used over and over again. And it has to be specific for the types of buildings you create. This will help you save plenty of time and money when it comes to coordinating with people to get your property looking perfect. Fill out the list and pay them their final payment once all punch list items have been addressed.