3 Effective High Level Real Estate Development Strategies
There are many proven strategies you can employ as a developer to build a niche for your company that you can come back to for years. Most developers get their start building single family and smaller multi-family properties that they sell or rent upon completion.
With volume, this type of business can make the development team great returns, but there are more complicated models that you may begin to employ as your company grows.
Remember that you can often find development consultant companies that you can hire can assist your team in transitioning into these new sectors.
1. Senior Housing Development
2. Affordable Housing Development
3. Historic Tax Credit Development
Provided by the federal government and many state governments, the historic tax credit program was designed to help preserve and rehabilitate structures that are considered important historical landmarks in their community.
To be eligible for federal historic credits, your project must be listed in the National Register of Historic Places or be deemed a defining feature of a historic district listed in the National Register. While similar to low income housing tax credits, there are some key differences.
Offered in the form of 20% tax credits, which are again calculated by multiplying the qualified total project costs by 20%, these credits are applied only for one year, once the property is put into operation.
Another difference from low income credits is these credits cannot be directly sold. The way to functionally “sell” the credits is to use a structure with an investor where they have a 99% stake in the ownership entity, allowing them to receive the credit.
As with low income credits, your investor will purchase these rights at some discounted amount, depending on market conditions. Functionally, however, low income credit deals also often have the investor taking a majority stake, so as to ensure compliance with affordable housing deed restrictions over the 10 year term.
As you can probably imagine, there are strict regulations to ensure developers maintain the character that made these structures historic in the first place. These are laid out in the National Park Standards for Rehabilitation.
Most states offer their own historic tax credits which work similarly, but have more flexible standards than being listed in the National Register.
One important thing to point out is that these development strategies are often used in combination with one another, making even more complicated, but hopefully also more profitable deals.
For example, many buildings listed on the National Register that have fallen into disrepair are located in lower income areas with a need for affordable housing. There are a large segment of low income seniors who need subsidized housing that fits their needs.
Learning these individual forms of development and using them in combination, depending on the circumstances, can lead you to envisioning deals where other may not be capable of seeing them.Affordable Housing Development: