As I mentioned in my previous article ‘Getting Development Approval for Your Land’, I discussed the importance of market research with regard to many aspects of early-stage development, such as knowing if you’ve bought the land at the right price, knowing the number of ‘units’ you can ‘farm’ on the land, knowing the correct zoning regulations and land height, just to name a few! I wrote this article because I want to reinforce the importance of market research to you before you go land shopping and throw your money away!
Most of us do this because we are passionate about real estate development, but we also do it for profit! And as the old saying goes, “you don’t go broke making a profit.” And that’s what development is all about. I’m getting a bit off track here, but I also want to reinforce the important point that you want to make a profit, but you also need to ensure that your team (eg BUILDER) is happy and makes a profit. So, going back to market research, this is the time where you do some work. You spend some gas money and put on your boots and head out to your ‘patch’, the area you are making your own! This is another story, and also something very important to your success. That is, choose the right patch. I’ll help you with that later.
As a professional developer, you will be doing this at the most fundamental level, as it is essential to your success in this business! You will learn and become familiar with qualitative and quantitative research and market analysis.
You need to determine the different locations in your town/city, eg ‘richville’, ‘poorsville’, ‘mediocresville’, etc. See what I mean? This is the beginning of your market segmentation! Can you put limits on this information? What about the limits on the areas you want to start your development career in? Do you know for how much you should buy land on your plot, not an estimate, exact figures? You have to do it, this is what I will show you how to do. This is what Real Estate Development Market Research is all about!
So basically what I mean here is that you need to know the exact price at which you should buy your land. It’s not an approximate price because Mrs. Jones told you that Bob’s on the street sold for $X, so the block she’s looking at is on the corner, so she’d have to pay at least $X more! Things that are tangible, and also not things that you’ve bought from an online real estate marketing site that gives you prices for the latest sales in the area, or what they say are the latest sales, that’s the problem, because We are talking about “real time” market research and in this game that is the ONLY thing that counts. Developers who rely on this information are wrong and have missed the boat. Markets change and getting research that is 3, 6, 9 or 12 months old is exactly that, OLD! You need yesterday’s prices and today’s prices, I hear you ask how do I get that? Through learning the right way! How do I learn the right way? Learning from someone who has done it successfully time and time again, choosing the right mentor, and following a system that works no questions asked!
As the media continues to throw all the negative crap that is going on in the real estate field overboard, and you see more and more developers not doing well, obviously you have to ask yourself, why are they doing so well? evil? What did they do wrong? The fundamental answer to your question is in the above! If they had done their market research and if they had been vigilant, there wouldn’t be as many of them in the situation they are in now. For example, Florida, their research would have told them that ‘units’ (residential housing) were starting to accumulate and development would have been put on hold. New markets analyzed and lots of money saved! Remember, after expansion always comes recession, and after recession always comes expansion, and this will not change! So you ask yourself, how do I know when the switch between recession and expansion will begin? DO YOUR MARKET STUDY AS I SHOW YOU AND YOU WILL KNOW. You’ll be ahead of the game!
