Top 10 Problems First-Time Builders Face

The perception we have of 2008 as a bad year for Real Estate Builders, coupled with the possibility that 2009 could be worse, deeply affects everyone in all Development fields. If your production doesn't stand up to the close scrutiny of your peers and your end users (your buyers), you will not succeed regardless of the economy.

Even with the tough climb ahead, Developers can find the Contractors, Agents, Brokers and clients in their local markets, or reach outward using internet or other advertising along with their current marketing techniques. Here are the most common problems first time Builders face, where diligence can help steer away from future problems.

Insurance

It is getting more and more difficult to find Insurance Carriers who work with General Contractors are becoming more cautious when working on large residential projects as it is difficult to secure across the nation. Due to Real Estate legal issues and construction problems, Carriers are also hesitate to write primary general liability coverage to Contractors involved in the development of single-family homes. Due to foreclosures and premiums are going through the roof over the fear of construction defect litigation and class action suits in many states around the country.

Mortgages

Standards have been dramatically raised due to the foreclosures of recent. Even for first time loans, it is harder for the Buyer to qualify and the same for Builders. Companies are demanding higher credit scores for everyone.

Foreclosures

The inventory of unsold homes is at it's highest ever. With foreclosures priced below the market, this puts pricing pressure on the Builder to comply with the norm in order to compete. A Builder must be willing to take the lower offer the Buyers are now giving.

Planning

Lack of a planning is another mistake that can be made. Thinking you have a market without doing the research to know if the economy and buyers will be there in the area. Once you have your investment model in place, then go find property to match that. Good planning in today's market might include being ready for the next boom when the inventory levels are back down and the market has leveled off.

Unrealistic Profits

Expecting quick money and thinking you will get rich really quick is not reality. You must be smart, willing to work hard and you have to know your risk tolerance. A smart builder will recognize that building to meet the needs of a prospective buyer while in the process, deliver greater value for their buyers investment, is essential to long-term success and profits.

Team Work

Building a team of professionals to work with. No man is an island and good relationships build good teams. You will want to build those with real-estate agents, an appraiser, a home inspector, a closing attorney and a lender, and Contractors that can be trusted.

Supplies

Paying too much for supplies and services is another reason Builders have difficulties. Because they pay too much for properties, the profit is lower than initially expected. With extensive research the Builder in not surprised later.

Miscalculations

Again, Planning and Researching will keep you safer than blinding forging ahead. It is advisable that after you do the research, you should double the amount of time and money you think it will take. If you can still make money then you can feel confident.

Back up Plan

You have seen the many developments that have sat there empty, or been a total defeat of purposes. Many Builders get stuck with property(s) after building them because they had no backup plan. Numerous Builders today have that plan and are working with Real Estate Management Companies. If the home doesn't sell, they will rent it out. Many are using a Lease/Option method to tenants.

Flexibility

More than ever before, Builders must consider change. People will always have housing needs and look for Builders meet them. Builders must find alternatives that allow them to continue to build in what ever market we are in. The leading trends added to the traditional successes of the area they are building in. One of those trends is to Build Green. We have numerous articles on Building Green for you to learn from.