Nov5Written by:Craig
11/5/2008 2:11 PM 
Developing Real Estate in any country can be considered a craft, and it is more than procedural tasks to be checked off of a list. It is a combination of analysis and intuition, economics and risk, detailed planning and emotional selling, diplomacy and aggressive tenacity. Both sides of the brain need to be involved, all the time. In Central America, there are unique issues in the development process, and Costa Rica has its own very specific critical components. Hopefully, my advice will stimulate some thought for those in the quest to become a Costa Rica Developer.
In my 22 years developing and selling real estate projects ranging from a single Fourplex to hundreds of condominiums and home sites, hotel/casinos, multifamily units, retail, and now Golf Course themed residential and mixed use communities, I have, thankfully, never stopped learning. In the articles that follow, I will attempt to distill some of what I have learned into something that will help you avoid the “brain damage” that can occur in this business.
First of all, there are four components to a winning project. I will cover just a few of the first, very important considerations of what is arguably the most important component. The first point to consider is that no one knows everything about this business. I learn something new every day I wake up and venture back out to move a development along. One of the keys to becoming successful in anything is to learn from your mistakes and always keep your eyes open for new information. Embrace learning new things, and you will have an edge over the competition.
Second, “Location and Site Selection”. Obviously, this is the number one component and can mean many things. When you mention the “L” word to most first time developers, they have visions of a sexy, beautiful beach, or a cliff top overlooking the ocean, or some other magical position. In reality, the most important factor regarding location is whether it is in the path of current growth or outside of it.
The factor that mitigates your risk is your potential development's location versus the current trends. If you develop in an area where growth is not already established, you may find it difficult to sell the property. The other side of this issue is that you are more likely to find cheap Real Estate, and you may be one of the lucky few who strike it rich by creating a growth trend in that area, but taking this gamble and losing is the primary way developers lose their shirt. So, the only way to minimize this risk is through effective planning.
There are two major variables in development: time and sales. Every other risk can be eliminated all together with careful planning and budget consideration. However, the best you can hope for with Time and Sales is to minimize their negative potential during the entire development process.
Growth in any community spreads along certain natural or man-made paths: along an existing river or ocean front, or just as likely along a highway or major boulevard. First, look at the community and find the epicenter of growth. What are the catalysts of the growth? Is this growth from fundamental events of job growth and natural population increase, or a temporary spike in tourism and fleeting interest? Following along this growth corridor and finding a position at the edge of it will be a strong mitigating factor of the sales variable. All things being equal, give me a spot that is directly in the way of natural growth patterns.
With all of that in consideration, roll out the map and follow the paths or growth corridors. These will go in many directions, so you must determine the two strongest paths and deploy your search and analysis along these. Once you have several potential sites along these corridors, check for the following components:
- How far is it from the edge of the Path of Growth? What kind of growth is coming?
- Is it safe now, and will it continue to be a safe area? A beautiful view is great, but if its not safe, the sales will be challenged.
- How far is it from the job growth epicenters? How far will your home owners need to drive to get to and from work every day?
- Look for the “window” onto the major roads. How much frontage does the land have? (more on this in Marketing)
- Check the traffic count that currently exists during high traffic times and attempt to project the increase going forward.
- Insure that the actual ingress/egress potential of your entrance will not limit the density and convenience of your project.
- Topographically, look for any complications that could arise in developing the project. Also, look past your site from the path of growth and determine if growth continues unimpeded, or will be stopped short, just after.
- Is there sufficient land, frontage, ease of development, soil type, drainage, WATER SOURCE, utilities, and proximity to daily housing needs (shopping, medical, etc.)?
- Is the local municipality open to development of the project you are planning?
- Finally, is there the ability to add “Environmental Value” to the land? (More on this in a later article)
As I said at the beginning, my hope is to stimulate thought, and provide a framework for each step in the development process. There are literally hundreds of other considerations and sub-components to be assessed all along the way, so keep your eyes open, stick to the facts and the reality, and don’t let emotion enter into your analysis. Look at the project from an economic position first, and don’t let one factor that is positive distract you from seeing the negative points of the land you are considering. Finally, take notes. MANY notes. Don’t simply visit and ponder. This process is one that needs disciplined analysis and comparisons between potential sites.
Happy Hunting! Next up, “Costa Rica Developer - I FOUND IT!”