Venturing in the real estate development industry is the desire of many investors. They find the real estate industry to be very lucrative. Real estate developers are the investors but they require the services of builders for them to achieve their eventual goals. There is therefore need for real estate developers to secure only the best builders for the projects. There are many parameters that determine whether a builder is good for the job or not.
For an initial real estate project, it is important to secure the right builder. Before the builder gets to work, the developer must prepare adequately for the project. Preparation starts with securing of the necessary documentation for the project. This is an important part of preparation for the project for it guides the entire process.
A bulletproof documentation is basically the foundation on which the builder will develop the property. It guides the processes to be followed during construction. With a bulletproof documentation, the builder can accurately quote it without making any assumptions. The documentation should include drawings for the work, engineering plans, landscaping, soil and energy reports among others.
Inflation of the cost of building can be done by the builder if the documentation is not bulletproof. The loser then becomes the developer who incurs loses. Omissions from the tender cannot be omitted during building and this will attract increased expenditure. The excess cost will be transferred to the developer. Therefore, do not lock down a builder before getting your documentation right.
To get the best builder for your initial real estate development project, you must also custom liquidated damages. This states what amount of money shall be paid as damages to the developer just in case the builder violates timeline agreements. You should not use plain faith that the builder will complete the project on time. Get a custom liquidated damages contract for them so that you are protected incase the project overrides the time allocated for it.
As you tie down the builder with a liquidated damages contract, provide sufficient time in the contract for the builder to finish the project well. You might end up with a poorly done project if the time is insufficient to complete it well. Of importance also is the concept that in real estate development, time equals money. From the concept, there should be a positive correlation between project timelines and the money to be spent on it. You must develop a matrix that figures out the financial implications of timelines allocated for the project. Applying all the strategies above will enable you to get the best financial deal for the tender.
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