Every project starts with ambition, but not all end in success. Some developers underestimate costs, while others fail to build the right team or secure financing. One of the biggest mistakes is starting a project without a clear strategy.
Take, for example, a developer who set out to build a 30-unit apartment complex. He had funding, a great location, and an experienced construction team. However, he overlooked one crucial detail—his project timeline. When unexpected delays hit and his main investor backed out, he was forced to scramble for funds. While he completed the project, his profit margin was far lower than expected. He could have anticipated the risks, structured a financing cushion, and avoided a near disaster with strategic planning.
In this article, we explore key strategies to avoid common real estate planning pitfalls. Here’s how developers can follow a structured approach on their next real estate development project.
Set a Clear Real Estate Development Timeline
Before breaking ground, work with your team to outline every stage of your real estate development. A well-defined timeline is critical in securing financing, managing risks, and ensuring profitability. Developers who fail to plan their timeline accurately often face costly delays, disputes with investors, and ballooning expenses. Examples of real estate phases include:
- Land acquisition
- Permitting and entitlements
- Financing and investor commitments
- Construction phases
- Leasing or sale strategies
A well-defined timeline not only keeps you on track but also reassures investors and lenders.
Assemble an Experienced Real Estate Team
Property development isn’t a solo endeavor. You need experienced professionals to guide you through every step. Your core team should include:
- A real estate attorney for contracts and zoning issues
- An architect to design the project within budget and city guidelines
- A general contractor with experience in your project type
- An accountant, such as Bernstein Financial Services, to ensure financial stability and cash flow management
Know Your Real Estate Numbers
Many developers underestimate costs or overestimate returns. A successful project requires accurate financial forecasting. These expenses include:
- Land costs, permits, and fees
- Hard construction costs
- Soft costs (architectural, legal, marketing, etc.)
- Financing interest and contingencies
One rule of thumb? Always budget for delays in real estate development. Unexpected expenses are the norm, not the exception.
Secure Funding Before You Need It
A major mistake is relying on a single investor or funding source. Smart developers structure multiple financing options, such as:
- Construction loans with flexible draw schedules
- Bridge loans to cover short-term gaps
- Syndication with multiple investors to spread risk
Never assume funding will be available mid-project. Plan for it before you break ground.
Keep an Exit Strategy
Will you sell or hold the property? If you plan to rent, do you have a property management plan? If you intend to sell, do you understand market timing? A strong exit strategy ensures that your profits aren’t left to chance.
The difference between a successful project and a financial nightmare often comes down to planning. If you approach development strategically—anticipating risks, managing cash flow, and assembling the right team—you’ll set yourself up for long-term success.
Bernstein Financial Services is a full-service accounting and tax firm that helps business owners meet their financial goals in their personal and professional lives. For personalized guidance, please schedule a consultation appointment with a Principal.