A Guide to Pre-Construction Success for Property Investors and Businesses

Investing in real estate offers lucrative opportunities, but the journey to success is paved with careful planning and strategic decisions. Drawing from nearly two decades of experience collaborating with and working for property investors, real estate developers, small family offices, and more, I've witnessed firsthand the challenges that can arise from vetting, building, redeveloping or maintaining existing property.

Before construction even begins, there are crucial pitfalls that property investors should steer clear of. Chief among them is the tendency to try to handle the pre-construction portion of the project independently or opt not to engage a General Contractor and/or a competent construction management team at all in an effort to “save money”. Newsflash, most lenders require it. This oversight ranks high among the missteps frequently encountered in our industry, resulting in prolonged delays for developers and investors, while carrying costs continue to pile on as weeks or months go by.

As a former realtor and commercial banker myself, I understand the imperative of frugality for property investors, rehabbers, flippers, and developers alike. However, the significance of partnering with a solid construction manager and general contractor who is not only investor-friendly, but also adept at orchestrating budgets and schedules, cannot be overstated. This partnership is a linchpin in crafting a superior product while optimizing returns on investment.

Here, we outline four (4) other common mistakes to avoid to ensure your project's profitability and seamless execution.

1. Poor Site Selection:

Location is the bedrock of success. Which is why, choosing the right location or existing property is paramount. Consider local market demand, accessibility, zoning regulations, and nearby amenities. Ignoring these factors could lead to properties struggling to attract tenants or buyers, ultimately impacting your investment returns. Working with an investor friendly buyer’s broker or realtor as a part of your team is also something we strongly advocate for after decades in the industry.

From a construction standpoint, poor site selection can lead to major environmental challenges such as soil contamination, flood risks, or proximity to hazardous areas. Addressing these issues during construction can be expensive and, moreover, extremely time-consuming (which is also expensive.)

Finally, it seems obvious, yet sites lacking essential infrastructure, such as water, sewage, electricity, and road access, can substantially increase construction costs. Particularly in the case of pre-existing buildings, which is why more commercial property is not being converted to multi-family residential or affordable housing as many would like to see. Inaccessible locations can also deter potential tenants or buyers, impacting the property's desirability.

2. Inadequate Due Diligence:

A crucial step in the site selection process, skipping the due diligence process can be disastrous. Comprehensive research into property titles, restrictions, environmental concerns, and legal hurdles is a must. Having the proper surveys, reports, inspections and consultants on your team can be the difference between successful construction and a pile of unforeseen conditions that could cost you a few hundred dollars, or hundreds of thousands of dollars depending on your market and the size of your project scope. It goes without saying that neglecting this step can result in unnecessary costly delays, unexpected expenses, municipal violations, or worse, project cancellations.

3. Underestimating Project Costs:

Accurate budgeting is key. Beyond construction costs, owners often fail to factor in permit fees, design expenses, financing costs, carrying costs, insurance, and a healthy dose of contingency funds. A realistic budget ensures your project remains financially viable.

A common challenge faced by many novice property investors is the accurate estimation of the After Repair Value (ARV) for their projects. This predicament arises primarily due to a series of factors, chief among them being the underestimation of construction costs. However, it's not just construction costs that tend to be overlooked; investors often neglect to account for soft costs and fall short in allocating sufficient funds for architectural and engineering fees, filing fees, surveys, permit fees, legal expenses, and other consultants such as a competent owner’s representative or project manager, typically a crucial stakeholder to get any successful renovation, restoration or new construction project off the ground.

4. Ineffective Design and Planning:

Finally, eEmbarking on construction without careful planning can lead to inefficiencies and expensive revisions. A clearly defined scope of work, accurate material take-offs, and considering lead times are pivotal factors in determining the success or failure of a project schedule. From a visual perspective, it's crucial to emphasize functional design and market attractiveness over personal preferences and individual design styles.

When focusing on aesthetics, the goal is to enhance property desirability and increase resale value. This requires prioritizing elements that align with the target market's preferences and needs. Collaborating with a design-build company like GloJoy Co, which boasts a meticulously vetted team of designers, architects, and engineers, is essential for achieving project success. Our combined expertise ensures that both functional and aesthetic aspects are harmoniously integrated into the project, setting the stage for a positive outcome.

Ready to embark on your next real estate venture? Don't let common pitfalls derail your success. Partner with our experienced team at [Your Company Name] to navigate the complexities of construction, maximize returns, and ensure your investment thrives. Contact us today by emailing our team at hello@glojoy.co or tell us more about your project here to start your journey toward a profitable and well-executed project.

Gloria Marie is the founder of GloJoy Co, (formerly known as G.Marie & Co) A General Construction and SMART Building Technology brand specializing in retail build-out, building upgrades or remodels, and adaptive reuse projects across the Greater New York Area. We take the frustration out of the construction process.