Pretor Business College

School of Business and Construction Management

Department of Business Administration/MBA
(Masters Program)

Course Title:
Advanced Real Estate Development (MBACM-634)
by:

Belete Ejigu (PhD)

Assistant Professor of Urban Planning and Development

December, 2022
1
 Content
• Chapter I: Introduction to Real Estate Development
- Definition Real Estate
- Real Estate Development process
- Overview of the strategic planning.
 Definition
•What is Real Estate?

- Real estate is defined as the land and any permanent structures, like a home, or
improvements attached to the land, whether natural or man-made.
- Real estate is a form of real property. It differs from personal property,
which is not permanently attached to the land, such as vehicles, furniture and
farm equipment.

- Real estate encompasses the land, plus any permanent man-made

additions, such as houses and other buildings.

- Any additions or changes to the land that affects the property's value
are called an improvement; improvements like drainage, electricity,
water and sewer systems tend to be permanent.
 Cont’d…

- Real property includes the land and additions to the land plus the

rights inherent to its ownership and usage.

- A real estate agent is a licensed professional who
arranges real estate transactions, matching buyers and
sellers and acting as their representatives in
negotiations.
 Cont’d…

• Real estate refers to real, or physical, property, and can

include land, buildings, air rights above the land, and
underground rights below the land.
•Real estate is real property that consists of land and

improvements, which include buildings, fixtures, roads,

structures, and utility systems.

- Property rights give a title of ownership to the land,
improvements, and natural resources such as minerals, plants,
animals, water, etc.
 Cont’d…
•Real estate is property consisting of land and the
buildings on it, along with its natural resources such as
crops, minerals or water
• In terms of law,

- real is in relation to land property while

- estate means the "interest" a person has in that land property

 Cont’d….
•Real estate is buying and selling land and plots basically
trading land for money for profits, whereas,

•Construction is constructing any building on open lands

or plots eg: house, warehouse, retail shop, etc. Which you
could lease/rent it out to tenants, sell it or keep it for
yourself.
Types of Real Estate
 Cont’d…
•There are several types of real estate, each with a unique

purpose and utility. The main categories are:

1. Land: is the baseline for all types of real property.

- land includes undeveloped property, vacant land, and

agricultural lands (such as farms, orchards/woods,
ranches, and timberland).
2. Residential real estate: any property used for residential purposes.

Examples: include single-family homes, condos, cooperatives, duplexes,

townhouses, and multifamily residences

 Cont’d…
3. Commercial real estate: any property used exclusively for business purposes,

such as:

- apartment complexes, - gas stations,

- grocery stores, - hospitals,

- hotels, - offices,

- parking facilities, - restaurants,

- shopping centres, - stores, and theatres.

4. Industrial real estate: any property used for manufacturing,

production, distribution, storage and research and development.

 Cont’d…
5. Special purpose: Property used by the public, such as
cemeteries, government buildings, libraries, parks, places of
worship, and schools.
 Characteristics of Real estate

•Real estate has seven characteristics that are either

economical or physical.
- The economic characteristics of land affect the investment
and market value of the land whereas the physical
characteristics relate to the land itself.
 Economic Characteristics

• Scarcity: the supply of land in a given location or a given

quality is limited
• Improvements: building an improvement on one parcel

of land can affect that land’s value and use

• The permanence of investment: the capital that is used for an
improvement of a property can be a large fixed investment.
Moreover, the return on such investments tends to be long-term and
relatively stable, making it a permanent investment.
• Location- Real estate location is the most important economic
 Social Characteristics
 Immobility: Even though one can move dirt and land, they
can never change the location of a parcel.
 Indestructibility: Land is also indestructible, permanent,
and the location will never change.
 Uniqueness: Although land can be similar and homes may
even have the same design or layout, no two pieces of land
are ever the same.
 Real Estate Industry
•The real estate industry can be divided into several
different areas:
1. Development
2. Sales and marketing
3. Brokerage
4. Property management
5. Lending
6. Professional services (law, accounting, etc.)
 1. Development

• Real estate development is a process that involves:

- the purchase of raw land,

- rezoning,
- construction and renovation/renewal of buildings, and
- sale or lease of the finished product to end users.
• Developers earn a profit by adding value to the land
(creating buildings or improvements, rezoning, etc.) and
taking the risk of financing a project.
 2. Sales and marketing

•Sales and marketing firms work with developers to sell the

buildings and units they create.

•These firms earn a commission for creating all marketing

material and using their sales agents to sell the inventory of
completed units. These firms typically focus on new units.
 3. Brokerage

•A real estate brokerage is a firm that employs a team of real

state agents (realtors) who help facilitate a transaction between
the buyers and sellers of property. Their job is to represent
either party and help them achieve a purchase or sale with the
best possible terms.
 4. Property management

•firms help real estate owners rent out the units in their
buildings. Their jobs include:

- collecting rent,

- showing units,

- fixing deficiencies,

- performing repairs, and

- managing tenants.

• They charge a fee, typically a percentage of the rent, to

 5. Real Estate Lending

•Lenders play a major role in the industry as nearly all

properties and developments use leverage (debt) to finance
their business.

•Lenders can include:

- banks,

- credit unions,

- private lenders, and

- government institutions.
 6. Professional services

•There are a variety of real estate professionals who work in the

industry and help make it function.

•The most common examples are

- accountants,

- lawyers,

- interior designers,

- stagers,

- general contractors,

- construction workers, and

 Careers or professions in Real Estate

•the most common jobs (titles) in the industry:

 Analyst – Performing financial analysis and valuation of properties
 Appraiser – Valuing properties
 Agent – a sales agent or “realtor”
 Building Inspector – Someone who examines buildings and works with appraisers
 Commercial Broker – An agent who sells commercial properties
 Director of Real Estate – A corporate job
 Home Inspector – Someone hired to assess the quality of a home for a seller or
purchaser
 Loan Underwriter – A person who analyses the creditworthiness of a borrower
 Mortgage Specialist / Underwriter – A person who approves mortgage
applications
 Real Estate Attorney – A lawyer who specializes in real estate transactions
 Strategic Planning

• Strategic planning is a process to figure out where your

company is going and how to get there.
• Strategic planning is a must for every business, big and
small.
• A strategic plan defines who you are as a business and
lists concrete actions to achieve your goals.
• When the unexpected occurs, a strategic plan helps your
business survive and find new opportunities while staying
true to your values and mission.
• building a strategic plan is a team-building exercise that
can bring together employees and transform how they
communicate.
• Strategic planning takes companies to a new level and a
new way of functioning
• Successful strategic planning requires close collaboration between
- owners,
- senior leadership and
- key employees.
 Strategic position
• Strategic position is closely related to the relationship
between a company and its environment
 A strategy system
• a strategy system composed of the following four components:

1. Product/market scope: it defines the product area of the

company and the markets to which the products are offered.

2. Growth vector : defines the direction of company development.

3. Competitive advantage: utilizes the finding of product and

market areas, and determines which markets best match the

characteristics and strengths of the company, giving it a strong,

competitive market

4. Synergy: is produced by the proper combination of various

resources and actions.

 Mission, Visions and Values
• These statements are guiding light for the company’s
strategy development.
• Mission answer:
- why does the company exist?
- what is our business?
- who is our customer?
• The mission should focus on markets rather than
products
 Cont’d…
• A mission statement can include the following issues:

- distinctive competencies
- purpose of the organization or philosophy
- business aims
- definitions of main stakeholders
- target customers and markets
- needs the organizations seeks to satisfy
- principal products and services
- geographical domain
- core technologies
• A mission statement should be:
- inspirational
- short & easy to remember
- consistent with values
- clear and concise
- focused on markets rather than products
- distinctive from mission statements of competitors
based on history, distinctive competencies, and the
environment of the organization
- achievable, realistic, motivating, and focused on a
limited number of goals
- same for all members of the organization
 Vision

• Vision –The vision statement helps maintain the original

concept of the company and its future development.
• The vision is almost an “impossible dream,” yet it is
simply a reality that has not yet come into being.
• It provides a picture of what the future should look like,
and guides the organization’s leaders toward that future.
 Contd…
• The vision statement must indicate a clear understanding
of where a corporation is today and how it should
proceed in the future.
• It should be seen as the primary corporate motivation,
rather than profit
• Vision statements should be action-oriented, present-
and future-based views of the dreams of executives
 Contd…
• A vision can include the following issues:
- competitive position
- competitive advantages
- operating environment of the organization
- predicted economic trends
- changes in demand
- market focus
- position in the supply chain
• A vision should be:

- realistic, action-oriented, concentrated on the

future, positive, versatile (considering various

stakeholders), interactive and dynamic, believable,

attractive and clear, harmonious with values,

stimulating, creative, practical, concrete

 Value

• Value – a value is “a belief in action,” which means a decision

is made about what is good or bad, important or unimportant.
• Values might include providing opportunities for employee
development, creating a safe working environment, or
maintaining environmental friendliness
• Values of an organization can be divided into three groups:

1. Ethical values,

2. Responsive values, and

3. Profit values
 Contd…

• Ethical values concern the environment, society and employees

• Responsive values emphasize the benefit to customers.

• Profit values stress the economic point of view and the benefit to
owners.
• Business values are statements that specify common rules and set
boundaries for an organization by defining what is right and
wrong and what is important.
• Business values reflect the organization’s sense of identity and
define both internal and external behaviour of the organization,
making them vital to the organization’s culture
• Values can include the following issues:
- ethical aspects: human rights, equality
- responsive aspects that emphasize the benefits to customers: service to others,
humility, integrity, reli- ability, innovativeness
- relationship to owners: profitability, productivity
- relationship to employees: individual’s self-determination, social appreciation and
acceptance, safety, employees’ development
- social responsibility: environmental friendliness Values should be:
. limited in number, not more than six statements
. known, consistent, practiced, honored
. purposely chosen & written down
. continuously discussed & checked regularly
. public
. lasting
. .clear, simple, direct, and easy to understand
. attractive and capable of being respected
. suitable for different cultures
. effective – they should have a real influence on the organization
.consistent with each other
Thank you!
 Home take Assignment
1.Ecplain briefly the difference between Real Estate
and Construction…10 students
2. list, the ethical, responsive, profit and business
value of your company…4 students
3. Explain the briefly real estate development
process
4. List out the mission and vision of you origination
and institution, and comment.