How I evaluate real estate development deals
I try to write on topics that I am interested in but cannot find good books or reads on the internet. Evaluating real estate development deals is definitely one of those subjects. Here is how I evaluate residential deals for value-add or ground-up development in a 5-step process: Market Analysis, Development Concept, Preliminary Due Diligence, Financial Modeling and Returns. Step 1 - Market Analysis Market analysis is usually the first step of any deal evaluation. It will provide a lot of useful information, such as area insights, demographics, product type/design, comps, etc. The most important information to a developer is probably the supply/demand and comps data of the specific product that you choose to develop. As legendary real estate entrepreneur and investor Sam Zell highlighted in his book Am I Being Too Subtle that real estate business follows the simple law of supply and demand! Here is the thought process on how I develop the supply/demand and ...