Real Estate Development

4 Replies

My long-term real estate investing plan includes one full-scale real estate development by  the time I am 30. I am a little way from turning 30, but I want to start learning what I can now about development and build to suit properties.

Developers -- What is the best way to get started in the world of real estate development? What would you encourage a mid-20s investor to do in order to prepare for a career in development investing?

Study finance. I work for a large Commercial firm and almost all developers (those that didn't inherit) have very deep knowledge of finance. Developing a building is all about the numbers.

Sorry I know that's glib but it's true. Developing a building is all about the end profit. And if you don't have the funds to go it alone most investors of significant proportion are strictly numbers people. (Those that inherit have the numbers person around them all the time).

Most want things like argus projections and heavy market data to quantify your vision. If you're not a finance person study it. Learn the terms and how to get to the numbers the investors want to hear. A little bit of salemanship to sell your plans and vision as well helps open the doors.

One other piece of advise, not sure where you live but get into networking with those already doing it. There are chapters of young professional groups in most cities. You'd be surprised the doors that can open

Sorry if I'm off base and over reading. I deal with it everyday on the large commercial side so I went there.

Originally posted by @Evan Manship :

My long-term real estate investing plan includes one full-scale real estate development by  the time I am 30. I am a little way from turning 30, but I want to start learning what I can now about development and build to suit properties.

Developers -- What is the best way to get started in the world of real estate development? What would you encourage a mid-20s investor to do in order to prepare for a career in development investing?

 We are two birds of a feather in this case. I am 23 and working on a Master's Degree in Urban Planning and Development with virtually the same plan as you. Hopefully, we can meet some seasoned developers as we move forward. Best of luck to you.

Originally posted by @Tim Hackett :

Study finance. I work for a large Commercial firm and almost all developers (those that didn't inherit) have very deep knowledge of finance. Developing a building is all about the numbers.

Sorry I know that's glib but it's true. Developing a building is all about the end profit. And if you don't have the funds to go it alone most investors of significant proportion are strictly numbers people. (Those that inherit have the numbers person around them all the time).

Most want things like argus projections and heavy market data to quantify your vision. If you're not a finance person study it. Learn the terms and how to get to the numbers the investors want to hear. A little bit of salemanship to sell your plans and vision as well helps open the doors.

One other piece of advise, not sure where you live but get into networking with those already doing it. There are chapters of young professional groups in most cities. You'd be surprised the doors that can open

Sorry if I'm off base and over reading. I deal with it everyday on the large commercial side so I went there.

 I currently live in Ohio. Do you know of any young professionals groups I could look into being involved in? I have joined the American Planning Association and am preparing to join the Urban Land Institute. Are there any others you might consider beneficial to a 20 something like myself?

A few things I find that helps:

1. You have to know the business. How do you frame a house, lay out a foundation? Whats the difference between residential and commercial building codes? You don't have to know everything, but you do need to know when a contractor is lying to you. Or more importantly what will fail city inspections. Because failures cost time and money. I see a lot of questions on here where people are trying to evaluate deals and they don't even have the vaguest clue about what capital improvements will run. I'm not saying exact numbers but you should have a sufficient depth of knowledge to walk into a neglected building and have a pretty good general idea what things will cost, and the ability to make a few quick phone calls to again get a general idea where your knowledge is lacking. I have no clue what it will cost to bring a commercial sprinkler system up to code, but I have enough people on my contact list who do and can get a number real fast. Same thing with developing land, you should have an idea of what roads cost, machine time, soft costs will be, etc.   

2. Know your city's zoning regs cold. I know them better than most attorneys. Most cities have a book, read it! I mean really read it. You spot things other people miss because very few people are willing to invest in the knowledge they need to see them. 

3. Know the finance numbers cold. IMHO this is the simplest part, financing RE isn't hard or magical. People just try to make it hard. Development is simply a numbers game based on current market conditions, a few assumptions about the future, and expect ROI. Really no magic here.

3.1 Become a pessimist. Never do a deal based on future appreciation. ALWAYS leave a good margin so if the market say takes a 20% dive your still OK. In hot markets this is hard, but its also a reason a lot of new guys come in very flashy and crash and burn in a very flashy way. Look to guys who have been threw a few recessions for advice.

4. Know your local market cold. Regardless of what that is, ie houses, commercial, rentals. Know what stuff is really worth, and keep a constant finger on its pulse. This will make or break you. 90% of the new people I see don't know this, and as a result over build, or get in way to deep with a building or whatever. 

5. You should be able to have a pretty good vision of what a parcel or building can be. I can look at a piece of property and more or less picture what I want to get out of it, or what I can get out of it. A lot of people really are challenged looking at raw deals and being able to see the final product, or potential. Its hard to spot a deal if you can't actually see a deal, the hardest part of my job is selling the potential to people who just see an old house, not a wonderful townhouse site with a coastal theme.

Those are a few basic ideas, I'm sure I missed a ton.

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