In this post, we will explain more about the tasks involved in being a developer and the responsibilities of the developer towards authorities and investors.
There is always a developer involved in the construction of a property. The developer is the person or company that commissions and finances a construction project.
The developer is either the natural or legal person who finances the construction of a new building. It is a developer who raises the necessary capital to plan the construction and orders the work to be carried out.
A client needs to work out how to budget and finance a construction project. They need to plan who will do what work and how to reduce the risk of cost overruns and delays.
The following is an outline of how the client goes from idea to finished construction project:
The client has an idea for a new building project. The first step in the building process is to consider and then plan what the building should look like. How big should it be? How should it be built? And within what timeframe and budget? By this stage, the developer has often already found a suitable plot of land for the project.
During this phase, the client will often engage the services of advisors, including architects, engineers and lawyers. These professionals will give the client an insight into how the building can be built within the limits of physics and the law.
Once the client has a solid plan with input from professionals, the budget can be finalized. The developer then has a good idea of what the project will cost and can begin the process of raising finance for the construction project. This can be done in many ways.
Some developers use their own funds, possibly in combination with a bank loan, to finance construction projects. Others invest through real estate development companies and will typically sell the building to make a profit on the investment.
A newer way to finance construction projects is through crowdlending. Platforms like Fundbricks allow private investors to make money by lending their wealth to construction projects. Once the project is completed, the real estate developer repays the loan plus interest.
Crowdlending has grown in popularity as both parties benefit from the solution; it is often easier for the real estate developer to finance his project through many small lenders than a few large ones, and the private investor can typically secure a relatively high return on a relatively safe investment.
You can read much more about crowdfunding and crowdlending here.
Once the plan is set and the financing is in place, the developer will give the job to a contractor. Many players investing in real estate development opt for a turnkey contractor - an all-in-one solution.
A turnkey contractor takes responsibility for everything from planning and building permits to the design and construction of the building. The client 'only' has to pay on time and the turnkey contractor takes care of the rest.
Although a turnkey contractor can act as both the executing and consulting party in the construction project, there is still a responsibility that rests with the client. Clients must ensure that health and safety legislation is complied with on the construction site and that the construction work is notified to the Danish Working Environment Authority.
It is also the responsibility of the developer, vis-à-vis any investors or lenders, to ensure that the construction stays on schedule. If construction is delayed, this can have serious financial consequences.
If the building is intended to be rented out, delays may affect the return to investors. It is therefore always advisable to consult a lawyer specializing in construction law to ensure that the developer is protected against delays and other risks.
From the private investor's point of view, one of the advantages of crowdlending through platforms like Fundbricks is that the funds are lent to the developer and not invested in the project. By lending the money to construction projects, the private investor can reduce their risk compared to direct investment in construction projects, but at the same time make a reasonable return.
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Historical returns are no guarantee of future returns. The money you lend to projects can therefore increase or decrease in value and there is no guarantee that you will get back the full amount lent.
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