New development can be a lucrative business. In fact, new construction currently represents one-third of housing inventory, compared to historic norms of slightly more than 10%. But not all real estate is created equal, and specializing in new developments requires its very own skill set, distinct from the resale market. If you’re thinking about getting into new development sales, here are five key considerations:
You have to be committed. Simply dabbling in new developments is not a realistic option if you want to be successful. As a real estate professional, this has to be your focus and your market specialization. You have to be the expert, and this means continuous education, an ear to the ground, and networking around new developments in your market. Do your research ahead of time to understand what percentage of your market is new development. Is a 1-3% market share worth the time and investment required to gain expertise?
Similarly, get to know the players in your market, as well as its history with new development. Which projects have succeeded? Which have failed? And why? Was it pricing, design, amenities, location, layout, or something else? Projects usually fail because the product and/or its presentation do not align with a viable buyer pool. On the other hand, projects usually succeed because they’ve accurately identified a need in the market and filled it at just the right time.
A commitment to staying on top of this ever-changing market, including an understanding of your community’s feeder markets, is key to achieving success in this particular space.
Understand the nuances of new developments. New developments require a different vocabulary and skill set from resale. You must understand compensation models, and depending on the project and your role within it, be responsible for both budget and vendor management. You must also possess a keen ability to continuously read the market and pivot when necessary. Another key difference is that you’re not just working with a buyer or seller. With new developments you’re working with and managing several clients all at once. There are certainly potential purchasers, but also the local brokerage community and the developer, who expects and requires your ongoing attention and insight.
Get ready for a longer timeline. Timelines are vastly different in new development. The process, depending on when you get introduced, can be upwards of three or more years. This not only means deferred compensation, but also ongoing client engagement that can go on for many months, or even years, until closing. You have to be okay with and committed to that.
Embed yourself in the project from inception. The ability to provide pre-development advisory to developers is a significant value add that will differentiate you in the space. Think of — and position — yourself as a trusted resource for real estate expertise on a developer’s team. By helping a developer to create a product that will sell in a future market, and then actually selling it, all while keeping the developer’s timelines, financial requirements and expectations in mind, you will cement your position as the go-to real estate professional for future projects.
Network, network, network. With the many different factors and variables at play contributing to the success of a new development project, it’s imperative to build a team of trusted experts around you. For example, you don’t need to be the expert in zoning regulations in your market, but you definitely need access to someone who is. Attend industry events, and consider joining professional organizations such as the Urban Land Institute (ULI) as well as local home builder conferences. Get to know how builders and developers think so that you can understand their priorities and anticipate any concerns.
If representing new developments sounds like your real estate calling, and bearing in mind the considerations we’ve discussed here, what can you do to get started?
My advice is actually quite simple. Drive or walk around your market and get a sense of what projects are out there and what you like. Call the developer. That’s right — pick up the phone and give them a good old-fashioned phone call. Tell them what interests you about their project, and also be prepared with selling ideas and strategies. Show your expertise in the market. Ask if you can set up a time to share your ideas more formally. Keep planting those seeds as you hone your expertise, continually educating yourself and building a network and a reputation in your market, to eventually see that effort take root.
Learn more at http://evrealestate.com/developments