The commercial real estate market continues to be one of the most lucrative investment opportunities for short term and long-term returns, especially in a metropolitan area like Los Angeles. You might not see yourself as a commercial real estate mogul and commercial land developers are often portrayed as uberwealthy tycoons with deep pockets. The truth, however, is that the commercial land development space is open to anyone willing to do the work it requires.

The key to starting out is developing a solid strategy from start to finish. The finished project may end up looking differently than originally thought, but having a plan for the whole process early on will determine the overall success of a project. However, not all strategies are created equal.

Taking on a commercial land development project can appear complex, costly, and unpredictable. Although not every element is within your control, having an overarching plan will mitigate much of the risk encountered by the project. There are many layers to commercial land development, but it does not need to be complicated.

Drafting a strategy upfront will help simplify the project and break it down into a more manageable sequence so that it is not as daunting as first imagined. There are several steps to the overall process, but with the right strategy anyone can find success in the commercial land development business.

The Initial Work Requires an Internal Analysis and An External Analysis

Begin with a deep analysis of both your own assets and needs. For example, many commercial land developers in parts of Los Angeles like Culver City or Long Beach are looking to expand on a related field in which they have found success. Often this looks like opening a second location for a profitable restaurant or retail business in which the restaurateur wants to move from tenant to owner in the new location.

Diversification is another leading motivator for those choosing to get into the commercial land development business. Whatever it is that leads to the opportunity, having a detailed plan that includes your assets and needs is vital. At some point in the process, you will have to present your assets and needs to those who you are convincing to partner with on the project.

The second analysis takes more of an external view. Evaluating current market conditions such as property value trends and the availability of programs or grants for which the project qualifies will determine your opportunity to secure lending at all stages. This is done through consulting the right experts and those in the area who have successfully completed similar endeavors.

Be Clear About the Value Your Land Development Project Will Add for All Involved

When you set up the development project as a coordinated effort between contractors, consultants, city planners, county agencies, and others as a means to add value for all involved, you are more likely to bring the right partners onboard. For example, many areas located west and south of Los Angeles continue to see a population boom. This presents an issue for the local civic leaders.

If they want these areas to continue with this current trend, then there will need to be more housing constructed. Therefore, you present your project as a solution to this problem and make sure to consult with the right partners about existing zoning ordinances or other regulations in place. If not additional housing, determine what other problem your project addresses for the good of the community.

Match Your Internal and External Analyses and Mitigate the Risk

Once you have an exhaustive internal and external analysis, then you can see where the two line up. Where do your assets and needs match with the market’s opportunities and conditions? This step in the process will help you draft your business plan and determine your delivery strategy for the project. This initial work also helps you clearly define the economic feasibility for the project and the overall cost to revenue ratio. Retaining consultants who are familiar with what you bring to the table and the current market conditions is vital to seeing where the two align.

Evaluating the risks involved and then developing a plan to mitigate each one at every stage of the project is also critical to the success of your strategy. As you zero in on location and scope of the project, adequate research is necessary to determine all the specifics. Zoning ordinances, the willingness of local authorities to rezone, and other factors produce the climate into which you are entering. These and other factors will vary throughout different parts of a large city like Los Angeles and they can be silent killers of a project if not clearly understood early on.

Drafting policies and procedures will ensure the proper management controls are in place at every level and for every partner in the process. A commercial land development effort becomes smoother and more successful the more that real estate agents, financiers, engineers, contractors, and local government are on the same page.

Be Patient and Willing to Play the Game Without Getting Played

Many new commercial land developers get impatient and force their plan through according to their wishes. This leads to mistakes that cost more money and relational equity than is necessary. As offers are made on raw land or existing development with plans to repurpose, original guardrails must be kept. Maintaining a ceiling on costs as stated in the plan can lead to rejections at first. However, developers whose offers have been turned down initially often receive a follow-up later when sellers come to terms with the true value of their property.

One last step to consider in creating a strategy for commercial land development is marketing the finished project. This needs to be part of the plan early in the process, rather than an afterthought. Determining methods for attracting buyers and tenants will include analyzing the cost to benefit ratio of all mediums. Marketing is just another reason why consulting with the right professionals is so important.