Successful real estate developments draw investors hoping to build wealth and derive income from their investments. The strategy of holding real estate long-term provides the means to use equity to finance other investment opportunities and eventually sell the properties in an upmarket.
However, the purchase or development of an investment property involves substantial real estate development costs. Upfront costs, ongoing expenses, and exit costs can diminish returns on investments.
As a developer, it can be tempting to drastically cut down on upfront costs in order to make the project more appealing to investors. But remember, oftentimes there is a trade off between upfront costs and ongoing expenses. There is a definite line where drastically reducing upfront costs results in skyrocketing ongoing expenses.
A smarter way to approach a development project is to actually increase the right upfront expenses in order to reduce those that will be ongoing. This will actually save money long-term and provide the best investment opportunity.
Investing in Rooftop and Outdoor Spaces
For most development projects, rooftop and outdoor living experiences make up a relatively small portion of the project’s upfront costs. But, they are spaces that (if not done right) can have significant ongoing expenses.
To save money long term, consider the following tips on rooftop and outdoor space.
1) Purchase High-End Site Elements
For any off-the-shelf, standard site elements and furnishings, pay for quality and durability. Purchase from the right companies that provide long-term warranties for all of their products. That way, if something happens to them down the line, you can get them replaced for no additional cost.
It can be convenient to dumb down outdoor site features in the name of value engineering, but be careful not to make it an exercise in “ongoing replacement cost engineering.” You very well could be shooting yourself in the foot with substantial future expenses if you go the cheap route on upfront expenses.
When you start prepping the property to sell, you don’t want the replacement of site elements and furnishings as a line item on your exit cost spreadsheet. By selecting the right products upfront, you leave yourself with one less thing to worry about when you sell.
2) Go for the More Expensive Plant Material
When there are cost overruns, plants are often a subject of discussion. Landscape contractors can offer very creative solutions, including plant quantity reductions and substitutions in the effort to reduce cost. Remember, not all plants are created equal.
A variety of factors including size, availability, and trademark determine the price of plant material. More expensive plants are often special cultivars that manifest the latest in plant science innovation. They are better adapted, more attractive and require less maintenance. These qualities are easily worth the extra dollars upfront as they can save thousands of dollars in ongoing maintenance costs.
Cheap plants that require tons of maintenance rarely get the attention they require on commercial properties. That means, at the end of the day when you are ready to sell your long-term investment property, many plants will need to be replaced. Pay a little more upfront and you can avoid paying twice for plants.
3) Use High-Quality Hardscape Materials
We all know some things just last longer than others. For outdoor amenities, this is absolutely true. Everything constructed outside will be exposed to the elements and some materials fare far better than others.
On a rooftop, for example, be sure to implement a pedestal paver system for a long-lasting surface. Pedestal pavers allow for easy access to the roof structure, waterproofing, and any gas, water, or electrical lines running below the surface of the deck. Although a pedestal system is more expensive upfront, it can make future maintenance easy and far less expensive.
Use a steel pool structure instead of concrete. It’s a more expensive option, but eliminates the risk of leaks that are common in concrete pool structures. For shade canopies, ensure that the major structural components are made of an outdoor rated metal such as steel or aluminum.
When it comes to surface decking, pools, and shade canopies, have them built to last. Hardscape elements that are not constructed properly become a huge liability and generate increased maintenance and replacement costs. It’s better to build them right the first time.
4) Select the Correct Type of Waterproofing
For highly amenitized rooftops, leaking is a constant concern. In the past, there were fewer solutions than there are today. Now, with great solutions such as Hydrotech’s Monolithic Membrane, there is no reason to construct rooftop amenities that will have waterproofing issues.
At the very least, use a fluid-applied waterproofing system for the advantage of being seamless. It is at the seams of sheet membranes where systems usually fail. Keep in mind that fluid-applied waterproofing is much less labor intensive to install. It can save on labor costs, even if the product itself is more expensive.
5) Get the Best Contractor
Hire the best contractor for the job. For rooftop and outdoor amenities, the low bid is not your best bet. Here’s why: Even if the more qualified contractor has a higher bid, you’ll probably end up saving money by hiring them. The low bid could easily turn into your most expensive option when the subcontractor realizes they underestimated the complexity of the project. Then you have ever-increasing costs as a result of change orders.
When it comes to subcontractors, especially landscaping contractors, watch out for inflated bids. Landscapers who lack the experience and qualifications to build custom elements at a reasonable cost will often overprice them. Verify their numbers with your design team to ensure you’re getting the lowest upfront cost while ensuring the best and most long-lasting product.
In the end, make your decision based on which contractor has the most relevant experience for the job. Don’t get caught by the appeal of low bid contractors or fall prey to the inflated bids of subcontractors.
6) Team Up with a Specialized Designer
Finally, hire the right rooftop and urban designer. By working with a specialist, you’ll get the guidance you need to get all of the previous tips right. They can help you get the most out of your investment on each project.
The Bottom Line
Spending more up front can save you a substantial amount of money on a long-term investment property. The important thing is knowing when spending extra can help, and when it is just spending.
Making selections based on long-term durability and easy maintenance is the way to go. An expert in the design of rooftop and outdoor amenity space can help you make the decisions that will boost your ROI.