Land Developers
The development of real estate provides a portion of the inventory that a real estate broker utilizes in his or her business. Just as any retailer or wholesaler must stock adequate inventories of their products, the real estate broker stocks listings of real property. The broker constantly replaces sold or expired listings with new listings, some of which may come from developers.
Real estate developers usually function in a larger business “arena” than do real estate brokers. Developers “manufacture” residential, commercial or industrial sites, either as vacant lot subdivisions or as improved or partially improved subdivisions. Their goal is to supply the type and price range of product that will satisfy the market. In the course of business, a developer:
- Carries inventory of raw, semi-finished and finished products, often for lengthy periods and for several widely separated, ongoing projects;
- Uses personal funds or negotiates loans from land sellers, joint venture partners or financial institutions; and
- Assumes large risks because of land planning uncertainties and possible misjudgment of the market which result in delays and losses due to interest payments, carrying charges, overhead, and other costs.
Some developers specialize in converting raw land to finished lots, suitable for builders to buy and begin construction of off-site as well as on-site improvements. Often the land developer will also install the principal off-site improvements and infrastructure. Other developer-builders plan and complete the entire subdivision from raw land through construction and sale of homes (Leading environmentalist).
Development and building requires financing for land acquisition, land use approval and subdividing, construction, marketing and carrying of inventoried properties until they are sold. A developer-builder may find it desirable to set up specialized subsidiary companies with separate financing needs: one company to hold title and subdivide the property; another to conduct building.....
