A Look at Industrial Commercial Properties

Michael Snedeker, a former Division 1 football player, holds years of experience in the construction and real estate industry. Currently Michael Snedeker serves as a builder and real estate developer at Shellback Industries, specializing in the construction of commercial properties. 

Commercial properties are non-residential buildings that are used solely for business purposes. They may include multi-family homes, such as apartment buildings, as well as retail, office, and industrial properties. 

Industrial properties typically have a large footprint, as they are designed to facilitate large-scale industrial operations as well as numerous workers and equipment. Manufacturing facilities, one of the most common forms of industrial property, are those that focus on the production or assembly of products. Alternatively, warehouse facilities provide storage and distribution capabilities through either a smaller scale flex-facility, or a larger-scale bulk warehouse. Lastly, hybrid buildings known as research and development (R&D) facilities combine the benefits of office and tech space in addition to offering manufacturing capabilities.

Here Is What Entrepreneurs Can Learn from Real-Estate Developers!

Any project needs vision, dedication, and funding to get it off the ground in today's competitive economy. When it comes to successfully executing a project, an entrepreneur can learn something from those employed in the commercial real estate sector.

The Feasibility Factor

A professional real estate developer takes every step to investigate all possible outcomes before committing to a certain project. This is known as a feasibility study in the commercial real estate sector. In fact, the developer will research all financial, economic, legal, and technological factors before going ahead with the project.

A feasibility study usually entails the analysis of the market, usage concept, competition, location, and risk involved in the project. The developer will have all this information in a written report before he/she decides whether to move forward.

Most of the time, a new entrepreneur will dive headfirst into the product development session without even making a true business case for the app, service, or platform. Such an entrepreneur is a likely to be surprised very soon when the costs skyrocket and he/she faces an unreceptive market.

Lesson: You are setting yourself up for failure when you don't analyze the market forces and risks before you start building.

 

Proper Planning

Once a developer decides to go ahead with a project, he/she takes on all the planning and coordination onto their shoulders - such as scouting, purchasing land, getting the licenses and permissions, creating a project team, financing the project, and managing the construction work. All this tends to happen within a few months or a very short period.

An experienced developer can take on multiple projects at a time even with all these responsibilities on his/her shoulders. How? It is through realistic project planning. As soon as the project is launched, the developer will draft an initial proforma plan and revise it as and when required. The project is rooted in the correct timelines, goals, and budgets even with an informal outline.

Lesson: Map out your strategies and objectives early on. Make sure you revise them regularly to stay in touch with your progress.

 

Smart Syndication

Commercial real estate projects come with a sophisticated financing structure - including debt and equity capital. In fact, different types of capital are arranged through a capital stack or a structure that dictates the order of claims to investment returns.

A developer may consider syndicating a portion of the capital stack depending on the project specifics. In fact, syndication is a precursor to crowdfunding. It is a process where the developer would divide some of the equity among a group of investors - such as high-net-worth people in their network. The investors will be informed about the investment terms, return projections, and project timelines up front.

The developer can easily raise funds for their projects due to the organized nature of syndication. An entrepreneur's effort to raise capital can be haphazard without a similar framework. In fact, an entrepreneur fails to close investors because he/she doesn't communicate or have a compelling exit strategy.

Lesson: You should have a well-structured strategy when approaching capital raising. Clearly inform the investors how you plan to earn them returns.

 

The Reputation Game

An experienced developer is quite adept at converting a personal colleague into an investor. That is because they emphasize ROI and they know that investing is not just about making money - it is also about backing someone you trust.

A developer will build a reputation as he or she completes projects. The investor will look at what the developer has accomplished, how his/her investors have fared in the past, and who is his/her partners.

You should be able to back up your pitch with past performances to find the right investors for your project. Keep your network informed and motivated to be a part of your success.

Lesson: A verifiable reputation is important for your success. This will compel the people who trust you to invest in your project.

How to Start A Small Real Estate Development Company

If you’ve always dreamed of being a real estate developer, you need to know how to start a successful company. Here are some of the best tips on how you can start a small real estate development company and make it successful.

1.   Site Selection, Urban Design, Site Planning and Civil Engineering

Securing a site is one of the most important decisions when it comes to starting a real estate project. Some of the important things to consider here include what you can or can’t do with the site and how your real estate project will be developed on the site. You can use these skills to compare different sites, blend in perfectly with the neighborhood, handle any land issues that might come up as well as utility and water conditions effortlessly.

2.   Entitlements

Here, you need to know what you’re entitled to do with the land, once you find the right one. Your entitlements, however, will be governed by the zoning code provided by the local municipality. As a developer, you need to comprehend what you can do with your site. Of course, you’re governed by the existing rules of setbacks, the height or size of your building, parking requirements. Also, you need to know whether there are risks associated with getting a variance or changing the classification of the land. You need to get in touch with the people in charge of issuing approvals, to make sure everything progresses accordingly.

 

3.   Real Estate Deal Structure, Proformas And Finance

Any real estate project will be successful depending on the contracts and finances involved. A simple project should have an operating partner who oversees the entire process as well as a capital partner who is in charge of providing capital for investment purposes. The two partners can seek more financing from other financial institutions. Using a proforma, they can track how the real estate development makes money through rent and sales as well as the distribution of the profits to the partners and loan repayment to the bank.

4.    Building Design

It is also referred to as the mechanical, architecture, structural and electrical engineering. It’s the basics of how the building performs. As a developer, you need to know the basic building codes to optimize functionality and size of each unit. Also, you can avoid spending a lot of money on the construction and installing the mechanical structures. Tenants will appreciate your superior materials and exterior detailing that’s appropriate to the context and your building will be durable for a long time.

 

5.   Construction and Construction Management

Project managers and skilled tradesmen are the key to the success of renovation or construction of a building. A construction manager or general contractor should leverage the work effort or knowledge of welders, plumbers, carpenters, roofers, electricians or installers. Thanks to contingency reserves and thorough planning, a small developer can manage the entire process as well as the risks involved.

6.   Marketing, Sales, Leasing and Property Management

Once the construction is completed, you can sell it, lease or maintain it frequently. You can hire brokers or agents to attract tenants or buyers as well as prepare the required paperwork to guarantee the best applicants. If you’re retaining the ownership of the building, there should be someone on call to handle the maintenance issues and that’s where a property manager comes in handy.

7.  Project and Business Management

You need to keep track of the details and communicate with people to make the real estate project a success. Also, you should handle the finances to guarantee proper cash flow through the project. You should identify where to make money then plan your business and tax arrangements accordingly to meet those financial objectives.

In conclusion, starting your own real estate development company isn’t an easy task. However, by teaming up with the right people for the job, you can manage any development effortlessly. By learning the skills mentioned above, your next real estate development will be successful. Take your time to learn the trade and do your research on where to maximize profits to avoid making huge losses when the building is completed.

The Path to Becoming a Commercial Real Estate Developer

Business owner Michael Snedeker is a resident of Boston, Massachusetts and heavily involved with commercial real estate development. 

Commercial real estate developers are involved in the buying, selling, and renovation of commercial properties. They manage the acquisition of land and the subsequent construction of commercial properties. They also sometimes provide investors with guidance on how to make commercial assets more profitable, considering factors such as property values, regional demographics, location, and local market trends. 

Becoming a real estate developer is a multi-part process. The first step is to acquire an undergraduate degree that will teach you the business and accounting skills required to manage commercial developments. Elective units that focus on real estate will provide additional insight into the field. After graduation, you can take your expertise further by completing a real estate certificate program.

Next, you should earn a real estate license from your home state and look for relevant work experience. Many commercial real estate developers start out as property managers and real estate brokers before making the move to development. After accumulating several years of experience in the industry, you should seek professional certification from an organization such as the Institute of Real Estate Management. Finally, to find success as a commercial real estate developer, you will need to hone skills such as relationship-building, risk tolerance, creativity, and problem-solving.