How a Real Estate Development Consultant Can Save You Money & Reduce Risk
Real estate development projects are laden with risk at all stages of the process - from site selection, through land entitlement and ultimately construction.
And most business owners, investors, and even junior developers don't have the experience or expertise to navigate the many unforseen challenges.
But that leaves you exposed.
In the video below, I highlight a couple of key areas where a real estate development consultant can help you save money and mitigate risk on your next project.
Guide to the video
- Missteps during the real estate development process can lead to 6-figure mistakes and even worse, failed projects
- A real estate development consultant can help you determine what feasibility items are critical to the success of a project
- It takes years of experience, and personally suffering from development setbacks, to be able to anticipate challenges that may arise during a project
Video transcript follows
If you’ve read some of the other articles and content I’ve put out, or watched some of our other videos, you may have heard me say that the real estate development industry is not built on information sharing.
And that really is by design. The development industry has long profited off the fact that most people don’t know how to navigate a project.
There are so many barriers to entry – political, financial, experience & resumé, professional networks, etc. – and on top of that, the expertise required to take a deal from start to finish crosses over so many traditional functions.
Not to mention, deals take years to complete. Your capital is often tied up for a while during a long sales cycle. And projects are laden with risk at all stages – from initial real estate due diligence through land entitlement and construction.
So, with all that to consider, it’s no wonder that real estate development has almost always historically been reserved for those with the deepest pockets or the strongest political connections.
But it doesn’t have to be that way. And a real estate consultant may be the answer to your problems.
What’s up everyone, it’s Matt Marsh, founder of Marsh & Partners.
Marsh & Partners is a development and national consulting firm that helps business owners and investors maximize their real estate and transform their businesses.
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Democratizing the real estate development process
The reality is that there’s no great central repository of information on real estate development.
You might stumble across a couple of blogs that have some quality material, but development can be so nuanced that you probably never have your specific questions answered. And maybe you don’t even know the right questions to ask.
Think about it this way. Most projects start with a vision. Maybe you own a property, and want to develop it, but aren’t sure what the highest and best use for the land would be.
Or maybe you’re a business owner, and know you really want to develop a new site for your growing company. But where do you start? How do you find a piece of land that would fit your needs? And more importantly, how do you know the project will be profitable or even fits into your overall business and real estate strategy?
They’re questions that need to be answered. Questions that I ask myself before I pursue a project, or before I buy a piece of land.
Begin with the end in mind as Stephen Covey says… Consider where you want to go, then come up with a plan to get there.
In this video, I am going to focus on a couple of key actionable areas where a real estate development consultant may be critical to the success of your project. Afterall, if you can manage and mitigate your projects risks, and save money at the same time, you’ll have a much higher likelihood of a profitable project.
Properly sequencing your real estate due diligence & development activities
Traditionally, I see this go one of two ways.
You put a property under contract or buy a piece of land and you have paralysis by analysis. You don’t know where to begin, what reports to order first, when to get in touch with and find the right civil engineer, or even how to assemble your real estate development team.
I’ve also seen real estate developers take the opposite approach and rush to get every pre-development task done as quickly as possible.
But that leaves you financially exposed. Are you even properly sequencing your critical due diligence tasks? Do you have any sort of confidence that your project will be approved before you commit large amounts of capital?
It’s a big challenge that even the most seasoned developers need to grapple with.
I like to frame it this way for my clients – consider first what feasibility items are absolutely critical to the success of a project.
Is it suitability of soils? Access to utilities? Buildable area and land yield? Project profitability metrics? All of the above?
The answer should be fairly straightforward, especially if you’ve codified your development goals ahead of time. But in many cases, junior developers, investors, and small business owners don’t have the expertise or experience to even begin determining where to start.
A real estate development consultant will help you determine what items are deal killers vs. nice to have’s. And then more importantly can direct your efforts and capital to properly sequence your development activities to mitigate risk and out of pocket expenses.
Keeping 3rd party consultants & other vendors in check
We’ve all heard the horror stories about contractors overcharging for work. Or charging for work that hasn’t been completed or was half done.
It’s often not malicious, or even due to incompetence either. Labor issues have and continue to plague the construction industry. And many contractors and builders are completely overworked.
But that doesn’t change the fact that if you’re in the midst of a development project, you need the job done right and need it done as timely as possible.
Real estate development project management and construction management are critical oversight measures that can save money and manage risk.
A real estate consultant will clearly define the roles and responsibilities of each supporting vendor and make sure the team is rowing in the same direction.
Consider what’s required during the planning and land entitlement phases of a project. You’ll have a civil engineer, architect, attorney and land use attorney, surveyor, environmental consultants, support engineers, a landscape architect, and other development team members all supporting the overall project.
But who’s directing efforts. Who’s providing overall guidance and smoothing the lines of communication? Who’s implementing cost control and quality control measures during vertical construction? A real estate development consultant will.
And that expertise managing outside vendors and implementing systems to drive project efficiency will ultimately lead to cost savings for the project.
Managing risk by foreseeing challenges
Most landowners, developers, investors, and business owners understand that anytime you’re considering acquiring and entitling land, or designing and building a property, there will be unexpected hiccups.
And the uniqueness of each piece of land and each project and each municipalities little quirks and guidelines can make it difficult to anticipate some of these challenges.
I already mentioned risk management as it relates to sequencing your due diligence activities. But what about political risk or land entitlement risk, or some of those harder to quantify, but absolutely impactful challenges that are often overlooked before undertaking a project?
Let’s consider land entitlement risk. A huge amount of legwork is required to permit a project before you can break ground.
I’ve seen developers spend hundreds of thousands of dollars during pre-development only to find out that a project isn’t feasible.
I’ve seen business owners close on land that ended up not supporting their company’s mission or their ground-up development needs.
And the biggest obstacle is the fact that unless you’ve experienced those setbacks, or learned those tough lessons through failure, you’ll never be able to circumvent or handle them as they arise. And you’ll certainly never be able to anticipate them.
A real estate development consultant, with the right blend of experience and expertise, can help manage project risk, ultimately reducing project costs and helping project stakeholders make more informed decisions.
So, what’s the key takeaway here?
Businesses don’t make key decisions by default.
Real estate investors don’t buy and sell property without analyzing all available information.
But all too often people bite off way more than they can chew when it comes to a real estate development. Why is that?
It really all comes back to experience. And gaps in knowledge and experience compound and often lead to expensive mistakes.
Don’t saddle yourself with unnecessary risk. If you’re in the middle of a development project, are thinking about pursuing one, or aren’t quite sure where to start, we might be able to help.
Book some time on my calendar, or you can reach out to me directly and let’s start brainstorming.
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