How To Cover Overhead While Putting a Real Estate Development Together ?
by Brian Bocchieri
(Edison New Jersey USA)
We are spot builder here in Central New Jersey, meaning we purchase single lots or dividable lots in established neighborhoods.
My question is with the time frame it takes to put a development deal together how can we cover salaries and overhead without depleting all our cash?
Answer In simple terms you should look at the salaries and overheads are your investment in the real estate development deal.
In my courses I teach you how to pay yourself throughout the development period, as well as recover your costs for putting the deal together.
This is why the study of my material is so vital and not only puts your development scheme on the correct footing, but also tightens up on your whole approach to the development business.
I have many friends who are builders and as you can imagine there is a fair amount of ribald comments between us and yet we are like hand in glove in the development relationship.
But can I tell you the "essential difference" between my buider friends and myself ... "We Think Differently."
Builders are precise people. Give them a site; give them a plan and the money and they will build you a house.
All those actions are real and tangible and that kind of activity appeals to a certain kind of mind.
A developer is a market oriented individual and only exists to satisfy a market demand, no matter what the market form looks like.
The developer is not an expert in any particular skill, but does know a fair amount about a lot of things and in particular how they all blend together ... in what order ... and the outcome to expect at every stage.
Now a developer may well have a building background, so that makes h/er "expert" in building. But when he/she is trained as a developer h/er job is to remove him/herself from the detail aspect of construction and become the general manager of the development.
One of the things you must do is put a dollar value on your personal time. There is only so much time we should be prepared to work each week and have a decent life. If that is true and it is, then it behoves us to get the best return for our personal work.
Just take these figures as a guide and not specific. In six months lets say you could build four houses as a builder. That will produce 4 times "$x" profit. In the same six months a developer could put a development deal together for 40 condos or 60 townhouses. Whose time is more profitable?
So that is why a builder who gets into development must get out of direct management of the building process - hand it over to another person and concentrate on the more profitable developer role.
Of course being a builder, it is not easy leaving the job you know backwards - hand your business over to an employee or partner and let them do the job, You Can Always Do BETTER.
Life was not supposed to be easy; but there's the challenge. Growth does not take place until you stop being the 'worker' and become the 'manager.'
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