Real estate is a fundamental store of wealth for generations and should form part of your investment portfolio. In developing a real estate project the following approach may be considered.
- Create a Vision for your project. The first instance of creating anything begins in the mind. What exactly do you want? Is it a residential property? Is it your home? Is it an apartment, mall, etc.? Whatever it is get an architect to impress your vision on paper. The architect should be able to give you a visual representation of your grand vision. Print this vision and put it on a wall where you can see it everyday. Also make this vision your screen saver on your phone. Dream as much as you can about this project at this stage. Remember you are creating something out of thin air and this is how you impress upon the universe that you’re serious.
- Count the cost. “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish.” Luke 14: 28 – 30. To begin embarking on a journey whose distance you don’t know is not very wise. So get a quantity surveyor to give you an estimate of the cost of the project. Real estate projects tend to be expensive, so ask the quantity surveyor to break it down in phases. For example if you are building a home you can start with the foundation, then the superstructure, then roofing, plumbing and electricity, and finally finishing.
- Project feasibility. Depending on your vision you may need to do a project viability analysis. For example if you’re doing a lodge or mall it is helpful to get an accountant or someone experienced in the trade to run some numbers for you. Typically you want to know the estimated revenues and costs, the cost of financing, the payback, return on investment, etc. This will help you make an informed decision. You can download a free template I have developed to analyze real estate investments here [https://urbanfarmsuganda.files.wordpress.com/2021/09/real-estate-analysis-the-money-engineer.xlsx]
- Get financing. As you start the project you need to acquire the financing. You can use your savings depending on the size of the project. However most of these big projects require some kind of debt financing. Talk to your bankers and see what is possible. Be careful to model out the proposed financing mechanism to ensure that your project objectives will still be met. Part of the financing can be used to acquire the land in the proposed location. Make sure your lawyer reviews the loan agreement.
- Get a contractor. A bad contractor will make you hate your project. A good contractor is a welcome relief. Try to avoid jua kali builders. Get someone professional and competent who has a name to protect. Ask for their portfolio of projects they have executed. Get a quotation from at least three contractors and then choose the best one. Get a lawyer to draw up the construction contract. Remember you’re now beginning to realize your dream. Don’t compromise your big project by doing informal things. These projects are always full of risks. A good contract can protect you in case a contractor abandons site or something worse happens like the building collapses.
- Start construction. It’s now time to handover the site to the contractor to begin construction. This will involve procurement of materials, labour, equipment, permits and other things. This period is quite stressful and depending on the size of the project you will need a good project management team.
- Project supervision. Ideally your architect should be your project manager and should be engaged for this service. The architect should have a clerk of works permanently deployed on site to supervise the project. Depending on the size and complexity of the project the client needs someone else on site whom they trust to watch out for their interests and give them unfiltered feedback. Builders will always try to cut corners and you need close monitoring to ensure costs are kept within budget, the scope is adhered to, and project timelines are met. This is the most painful stage of the project and you need all the grit you can summon.
- Project handover. Finally everything goes according to plan and you reach the end of the tunnel. This is no easy accomplishment and should be celebrated. Through sheer guts and force of discipline, you have imprinted your will forever upon the face of the planet. You have proved that a dream can be turned into reality through dedication and persistence.
- Occupy premises. Now it’s time to cut ribbons and occupy your premises or bring your property to the market. If it’s a commercial building you need some kind of marketing to attract tenants and potential customers.
- Maintenance. You may need to hire a building manager to manage the property on your behalf including regular maintenance throughout its lifetime. The building manager will also manage the tenants and other ancillary services like garbage collection, security, etc.
PS. You can download a free template I have developed to analyze real estate investments here [https://urbanfarmsuganda.files.wordpress.com/2021/09/real-estate-analysis-the-money-engineer.xlsx]