August 4, 2022

Phases of Construction in Real Estate

A lot of people buy Real Estate as an investment. These properties are usually rented out or sold quickly, often using “flipping” techniques to capitalize on arbitrage and rising values. These methods also involve repairing and reselling properties to increase their value. For example, in some markets, a home may be cheap, but it could easily increase in value in a short time. In this case, you’ll profit if you buy the property at a low price and quickly resell it for a higher price.

Construction phases

When a construction project begins, there are different phases involved. The first phase is the initiation phase. This is the time when all stakeholders need to meet. This includes reviewing the plans and assigning laborers to teams. A meeting is also needed to determine roles during the execution phase. It is essential to communicate frequently with all stakeholders. Once all stakeholders agree on the project, the next step is to begin construction. Once the construction phase has begun, the owner will begin the distribution of the design plans.

The second phase involves determining the type of project. Unique projects are usually more complicated. While a big box store in an empty field is a straightforward project, it is not always the same. Unique projects have a variety of design and planning issues and may require significant efforts to acquire approvals. The architect will coordinate with a civil engineer to determine setbacks from property lines and easements. If the lot is a steep slope, the civil engineer will perform a slope band analysis.

Appraisal phases

In completing the appraisal process, the appraiser should collect pertinent data on the subject property. This data can be general supporting data, which includes data on neighborhood units and other properties, or specific property information, which is collected for a particular parcel or property. For example, in completing the appraisal of a commercial property, the appraiser must gather data on the rents and costs of living and operating expenses in the community. The appraiser must then develop a cost approach to the process to use the data to determine a fair market value for the property.

Value is created when the buyer can obtain something through trading. The buyer must have the purchasing power to acquire the item. The appraiser must determine the value based on the buyer’s ability to satisfy that desire. In real estate, the appraiser should also include their opinion about the value of the property. However, there are several phases of appraisal. Listed below are the phases of the appraisal process:

Financing phases

The financing phases in real estate are important for a number of reasons. These phases are generally associated with the market cycles. For instance, when a market is in an upturn, investors will often seek out properties that have high growth potential, despite the risk. At the same time, when the market is down, lenders may be sceptical of investing, and investors may turn to private lenders or hard money loans to help fund the purchase.

During the expansion phase, property values are at their highest, and vacancy rates are low. New developments are being built and a large number of properties are being renovated. This phase results in an excess supply of properties. As a result, rents will be lower than normal. In addition, during this time, investors will be able to rent their properties for higher rents, making this a great time for investors to consider buying rental properties.

Rental phases

The recovery phase begins when the economy is recovering. The economy is in an upswing, and rental rates and occupancy rates are high. However, the supply of space is limited, and new construction is slow or nonexistent. Rent growth is typically flat or negative and below the rate of inflation. In the early stages of the recovery phase, it may be difficult to discern the beginning of the recovery phase. Ultimately, however, a recovery phase can be profitable for landlords.

The expansion phase follows after the recovery phase. At this point, rental prices start to rise and vacancies decline. As more construction projects are completed, rental prices tend to rise. Core-plus investors may also want to consider investing during this phase, as the risk of losing money during this time is lowest. And while this phase can be risky, it can be an excellent time to make repairs or refurbish a property. After all, this is a good time for value-add investors who are looking for a fast-growing rental market.