South Florida is a beautiful area with plenty of real estate opportunities and a thriving market, but that doesn’t mean that residential development is easy. There are plenty of mistakes that can slow your process, impede your progress, and cost a significant amount of money to correct. Being aware of these mistakes can help you to ensure that your path to success arrives on time and within budget. In this article, we will explore some of the more common mistakes residential developers make in Miami and how you can avoid them.
During our experience designing and working as and with residential developers, we've found that at least these eight costly mistakes that take a big toll on the return on the investment:
In residential development, doing your due diligence is one of the most important best practices to keep—and this is true whether you are in the state of Florida or anywhere else in the world. Due diligence is not just about being thorough, it is about making sure that you put in the appropriate amount of dedicated research in every single area to ensure success.
A lot of the time, proper due diligence involves work from a variety of different industry professionals. It means having a clear goal and a full understanding of what successful residential development looks like, and it also means having the right people around you to make up for any gaps in knowledge. You will never regret putting in the extra work, but you will absolutely regret failing to do so.
One area where due diligence is really needed is during the discovery phase. Before you ever kick off a project in Miami, it is very important to have the knowledge that you need to be successful with every step of the development process. Doing plenty of research or hiring someone to do a Feasibility Study, who can fully understand the needs, requirements, and timeline restrictions is very important. Failing to understand these needs can result in scope creep, where the project requires more and more, ultimately negatively impacting the timeline and budget.
Real estate is full of opportunities, and this can lead people to be overeager when entering the market. Even seasoned residential developers have been known to purchase property for a higher price while making the assumption that it will pay off in the end, but that really isn’t a guarantee.
When you overpay for a property, it means one of two things. Either you have not done the appropriate research to understand how much you should be paying, or you are too focused on what you believe will be a high payout that will make it all worth it. In the end, overpaying is overpaying, and it can cost more money, particularly if your investment takes a turn for the worse. There aren’t any promises in real estate, so it is important to avoid overpaying in hopes of receiving more money down the line.
Scheduling is an area where mistakes can cost a significant amount of money. When the schedule is pushed out, it always means that more time, resources, and human capital will be needed. All of these additions will result in a direct monetary hit, even with the smallest scheduling change. As much as developers want to believe that the project will always follow the schedule that they layout, this is simply not realistic. Scheduling a shorter amount of time will not force a project to follow that plan. It often results in a need for rescheduling, complex cross-team communication efforts, and bad news for stakeholders.
To create a schedule that works, it is important to be realistic and make decisions that are based on the available information rather than what you would like to see. All residential developers want to have their property ready to go as soon as possible because it will come with a payout, but setting a realistic finish line is important to avoid unnecessary expenses down the line and fulfill the expectations outlined in the original project plan.
The teams that you work with during development projects will play a crucial part in meeting project needs, finding the right requirements, and staying on schedule. A competent and professional team will have your same goals in mind and will have the knowledge and expertise to bring the project to fruition on schedule. It is important to look for the best option when it comes to finding or building a team. Avoid simply going with the lowest rates or the first team that you come across. There are plenty of talented industry professionals in the Miami area, so make sure you do your research.
Successful residential developers know that spending the right amount of money on industry professionals is a very important part of the process. If you try to spend less, you will often end up working with professionals that offer less in return. Additionally, if you try to pay professionals that know their value less money than what they deserve, you will have a poor reputation, which can impede future projects.
The real estate world is vast and thriving, and there is plenty of money to be made within it. Unfortunately, these gains are not immediate. All good investments take time, and real estate isn’t any different. People often listen to podcasts or read popular blogs and decide that they can make a lot of money very quickly in real estate, but that really isn’t the case the majority of the time. It requires time, effort, and an understanding of the entire process to be truly successful and start receiving those large payouts.
The great thing about real estate is that it is possible for anyone to enter the industry, but that doesn’t mean that traditional standards go out the window. Treating your real estate development project as a passion project rather than a business is a mistake that can have plenty of costly expenses. You must be professional in every step of the process and avoid being too casual when you work with vendors, team members, and others in the industry to maintain your reputation and build lasting connections.
There is no arguing that residential development in South Florida has plenty of potentials and can provide a wonderful source of revenue. With that being said, knowing the mistakes of residential developers in Miami or other parts of Florida can help you to enter this industry poised for success. There will always be ups and downs, but going in prepared can help you to achieve your goals and improve your growing career in residential development.