How to choose the most profitable project for a real estate development?
If you plan to invest in real estate you must know the needs of the market in order to select the project that can provide you with the best returns.
There are many reasons to invest in real estate. Through a correct choice of real estate, you can obtain an asset that generates passive income and have a capital that will increase its value over the years.
While the local currency depreciates with the passage of time and inflation, real estate increases its value, in addition to being able to generate short, medium and long term profits.
It is a very profitable business model, although there are variables to take into account in order to find the project that can provide the best benefits.
Therefore, there are certain factors that you should analyze when putting your money in a real estate development project.
The types of real estate development projects are:
1. Corporate: rent or sale of offices,
2. Commercial: rental or sale of commercial premises,
3. Residential: single-family and multi-family,
4. Industrial: rental or sale of factories, industrial parks, among others; and
5. Mixed uses: combination of different land uses such as residential, commercial and leisure,
6. Hospitality: hotels, coliving, guest houses.
The construction of these types of real estate developments is subject to the land uses allowed within a specific area, although these uses are not limiting for the choice of the project.
What are land uses and how to avoid falling into the limiting vision of the projects:
Land use is the set of activities you can carry out on a piece of land. Before choosing the typology of the project, you must know what are the construction possibilities allowed in a given area.
Although each property has a certain land use, it does not imply that it is limited to a single product. There are different sub-products that you can build within the permitted typologies.
If you can build apartments on a property, it does not mean that they are of only one type: it is possible to build different types of apartments.
Overcoming this limiting vision of land uses is a variable that gives better returns to real estate projects.
How to choose the real estate development project with the best return on investment:
To choose the most profitable real estate development project typology you have to base your decision on an existing market need.
Many developers base their decisions on a market study that indicates what is being developed in a certain place and what is its value or its characteristics.
This research indicates what type of construction is being done in the area and how much it sells for. In other words, they focus their results on the particularities of the existing supply.
The problem with those results is that you cannot know if that supply is linked to an available market demand.
In addition, if the same type of projects are built in a specific area, two things happen: the profit decreases and the risks of investing your money in a saturated market increase. So, how do you know that this offer is what can bring you the most money in the stock market?
At A-001 we believe that the most important variable to take into account is the real market need.
The market demand as the most important variable to determine the typology of the real estate development:
In the workshop we design and work with urban socio-demographic analyses that yield available markets: people with unmet needs.
As an urban planner I work to locate those target markets and understand what are the existing needs of each one of them.
If you know what the unmet needs are for a particular group of people in a particular area, you can reduce investment risks and increase profit margins.
Read the market to reduce investment risks:
The risk is in investing based on supply studies with an invented need and not analyzed for actual demand from people.
What may seem to be a safe investment due to a certain offer, may turn into you putting your money in a saturated market.
On the other hand, if you are able to identify the demands of people and not the supply of real estate, you know that there is a public with an unmet need.
This is a way of reducing investment risks and knowing that there is a public with needs that a certain type of real estate project can satisfy.
If you want to know more about the methodology we use in urban socio-demographic analysis for real estate development, do not hesitate to write us and we will contact you as soon as possible.