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What are the Different Types of Real Estate Development?

Are you thinking of becoming a real estate developer? It is one of the most rewarding areas, and a lot of people would like to jump in.

Cesar Cheng
July 13, 2021
Site planning

What are the Different Types of Real Estate Development?

Are you thinking of becoming a real estate developer? It is one of the most rewarding areas, and a lot of people would like to jump in. Before you can get into it, it is important to appreciate that real estate development investment developers falls into different categories. In this post, we will take a closer look and answer the big question, “What are the different types of real estate development?”  

Brownfield 

This is a unique form of real estate development that targets improving land that had previously been developed. Often, these areas are abandoned because the facilities are not enough, high pollution, or the zoning did not favor them. Therefore, the bulk of the work involves upgrading the facilities to meet the latest clients’ demands. 

Benefits of Brownfield

  • The Costs Involved are Low 

Because you are dealing with an already existing infrastructure, developing it will be cheaper compared to putting it up from scratch. This means that you can complete the project faster and get tenants of buyers faster. See – why spend a lot of money working from scratch when you can develop an already existing property for the same results?

  • The Project can be Completed Faster 

When the original developer was planning or putting up the property, he/she acquired the required authorizations. For example, the building design was evaluated and approved for the construction works to commence. Therefore, you will not need to go back for the same approval. This means that once you sign a contract with an appropriate developer, the upgrade construction management works can commence immediately. 

  • The Project is Economically Viable 

The property might have been abandoned because it was no longer suitable for the previous user. Therefore, the local authorities are likely to approve alternative uses. For example, a building that no longer suits industrial operations might be developed into high-value commercial or residential units. 

Demerits of Brownfield Real Estate Development 

  • Development Constraints 

If you are developing a real estate from scratch, there is a lot of flexibility. However, there are major constraints when working on a previously developed property, requiring major compromises. 

  • Operating Challenges 

In most cases, you will find brownfield properties located in less desirable areas, such as inner-city and sections that experience a lot of traffic. Accessibility and even working logistics might be a major challenge when developing these areas. 

  • Environmental Issues 

Many houses are vacated because they do not meet the health and environmental standards. For example, if a house was designed with asbestos or other harmful materials, its development will require changing them.  In such a case, planning and transforming the property to meet the modern standards might be expensive. 

 Greenfield Real Estate Development 

This type of real estate development involves developing land that was previously undeveloped or used for agriculture. In most cases, these are unfenced open fields, undeveloped but restricted plots in cities, or unutilized government land. So, what are the pros and cons? 

Benefits 

  • The Developer Enjoys Maximum Flexibility 

Unlike the brownfield development model, the Greenfield option provides the developer with wide-open spaces that come with great flexibility. This implies that you can test different housing project concepts for better result. 

  • Compliance with Environmental Standards is Easy 

Because you are working on the project from scratch, it is easy to select high-quality and approved materials for construction. This means that the house will be safer, approval by authorities will be faster, and the cost of clearing debris will be lower because there are no hazardous materials.  

Cons 

  • Huge Costs 

Because the project is starting from the ground, the entire process housing job can be complex and expensive. Think of the cost required for building design, getting approvals, acquiring materials, and labor for the entire period of construction. 

  • It can Take A Lot of Time 

Once you have decided to develop a new field, the time required to complete the project can be lengthy. By the time the new property will be ready for occupancy, the chances are that a developer working on brownfield real estate development will be on the second or third project. 

Residential Real Estate Development 

This type of development targets developing property for residential or living purposes. Therefore, the main focus is ensuring they are properly designed to provide users with all the facilities required to make home life comfortable. So, you might want to use good building design software for construction management, including creating visualizations that capture things such as kitchen, living space, and bedroom. 

Benefits 

  • Because every person needs a home, the demand will always be there, whether for rental or for sale. 
  • It can be a good source of passive income if you opt to rent to tenants. 
  • Residential real estate is a great option for diversifying a personal investment portfolio. 
  • Selling residential property under normal market conditions is easier.

Setbacks

  • Developing the property from scratch can be expensive. 
  • If you develop residential property in the wrong area, selling it can take a lot of time. 
  • The price of the property can be impacted by a lot of factors, from outbreak of a pandemic to government policies. 

What Do You Need for Real Estate Development?

To invest in real estate development, the most important component is goodwill. It comes in handy along the way to help property investment developers overcome the challenges that might be encountered. Other important requirements include: 

  • Professional architect. This is the professional who will work on the plans and help you to conceptualize the final project. Most architects use the latest building design software to design buildings.
  • Enough resources. The process of developing property can be expensive and it is important to be prepared with enough funds to pay for property, labor, and materials. If the cash you have is not enough, it might be a good idea to explore alternative financing, such as bank loans.

If you are an aspiring real estate developer, it is important to understand the different types of developments you can engage in. The options we have listed above are only a few. The list can be longer. You might also want to consider industrial real estate development, commercial real estate development, and redevelopment. 


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