Good development: One in which the market value is greater than the total development cost.

(Rents- Expenses)/Capitalization Rate > Land + Hard Costs + Soft Costs

Capitalization Rate: The conversion number to predict future income. You can get it from an appraiser or the internet. Low cap rates are good, high, bad.


As a developer you want to control the right side of the equation (costs). You can work with your architect to keep material costs down. Maximize rent by doing market research to understand what people are willing to pay for (location, design, features/amenities). Try to get cheap land. Duh.

Triple net rent option. (http://www.wisegeek.com/what-is-a-triple-net-lease.htm)

Generally, if you are producing good development and adding value to a location, you are adding value to the community (though some people are/can be worse off).

Land developer: goes through the zoning and subdivision process, readies lots, and sometimes puts in infrastructure.

Land speculator

Real Estate Investment Trust: Owner is not really a developer, owns a portfolio of developments, bundles a bunch of similar products and operate them (Green Street Properties?). They want to maximize their "Funds For Operation" (FFO) growth and having property appreciation. This increases their stock. They can start to develop their own buildings and they do sometimes when they are unable to find lucrative properties. Theoretically know how to get and keep good tenants.

The Non-Profit developer: Typically rental housing to people that make less than 60% of the AMI. What a NPD is trying to do is create high quality rental housing that would rent at market rates or higher (really good housing) and then take that surplus to discount the rent (perhaps equity?).

debt = mortgage
equity = investment (the difference between market value and outstanding debt)

Lender simply wants to know if you can repay the loan (must show rental plan)
Equity Investor: wants to get investment back with interest which comes in two forms; periodic cash flows and appreciation.
Broker: Works on commission so they care about the quality of your project regarding how it will fare getting people into the building.
Government: functions as a regulator (give you the permissions to build the way you want).
They want the property to add to property values and have minimal social and environmental costs.

*most real estate is owned by REITs, Universities, individuals and investors.

Assessment is property tax; appraisal is the market rate.