Here comes business strategy that makes real estate business a success

Real estate tycoons rule the world. Good example is Donald Trump. He made his money and fame in real estate before venturing into presidency. What is the business strategy that guided him: simple it is known as ECM an acronym for economic, construction and marketing feasibility.

Economic Feasibility

Fine print in economic feasibility is the hidden-value a piece of land offers to a developer. When I said hidden value it means nobody before you ever walked into that land. Mainly off the market, sometimes wedged between two big plots that are more conspicuous than the one you have picked up with an assured potential growth in the next few years. 

Three aspects require critical view: location of the property, the demographic structure at present and the demand and competition for real estate in that area. Because potential growth is going to give you the forecast return of the property. So by factoring a degree of uncertainty in the future market you have to size up with risk and return profile covering cost and revenue streams along with overall profit that you get out of the project.

Construction feasibility

In real estate development there are two stages. One relates to the land development and other is building. Raw land development is a sunk cost and does not give any return because it cannot be monetized. This includes implementing zoning regulations, paving roads, laying utilities and providing space for recreation, reserving part of the land un-built to facilitate movement of air and light. The second part of erecting the building is time and money consuming as you have to conform to building regulations and the architectural design that provides all modern conveniences in an aesthetic manner.

Marketing feasibility

Last but not least is the marketing aspect. At the drawing stage you can come with any marketing and pricing plan. Yet construction spans into few years and the cost over-run is immense. You have got to be smart in understanding the value proposition tomorrow and cost stream today. This is critical task indeed. 

A key barometer is to look at the current market pricing of comparable properties in the surroundings and project the likeable price that could prevail in time to come. Having done this it is the marketing promotion that matters a lot. It would be better to use two business tactics: either make a mock unit and skim the market for pricing or start the promotion blitz when 90% of the construction is done.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist