Real estate development is complex and comes with unique risks. While securing initial financing and completing the final project are starting and ending points, it’s important to consider a plan that covers everything in between, and that’s where insurance for real estate developers comes in.
Any investment property risk consideration includes answering these questions:
- What is the type of project being considered?
- What are the stages of development?
A speculative development project can be more complicated than a built-to-suit project but can also come with a larger financial advantage. Unlike a built-to-suit, there may not be leasing commitments prior to construction with a spec project, meaning the final use may not be known.
Both spec and built-to-suit projects require similar predevelopment considerations before breaking ground. The first step is usually completing a feasibility and market analysis. This analysis takes a look at both the need for the anticipated development and the return on investment. Further predevelopment considerations may include:
- Construction and zoning permits
- Environmental assessments and site preparation
- Hiring project managers, civil engineers, and architects
- Site, development, and building plans
- Legal fees
This is also considered the riskiest part of the development process. It can be imperative a real estate developer has the right insurance coverage in this phase.