My plan to become a Real Estate Developer - what&#x27;s your take?

Ellsworth Afb, SD · Member since 2016 · 11 posts · 2 votes

9y

I think everything you stated are amazing ways to generate cashflow, creating rapport with various people in the business, and acquiring a wealth of knowledge of real-estate that simple research can't teach you. No one becomes a developer overnight and I think it's always a good idea to get in the game young, and it's good to see you are approaching it from a realistic perspective.

That being said, your main hurdle will be capital, which I assume is why you want to start flipping/wholesaling first. Many lending institution like to see some kind of experience in the field before they lend you money. It's an annoying little catch twenty-two, but there are many avenues to acquire funds without getting a loan. Overall I think you're onto something there. Your plan can always use some fine-tuning, as with every plan, but you're definitely on the right track. I highly recommend you find a mentor. Someone who is already at your end goal. The ones who are good at what they do are generally more than willing to talk to you about how they did things, so you can decide where you want to go from there.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

continue your education and get a DEGREE in the field there are some great programs out there.

Go to work for a large developer... intern at said developers companies.. work your way up the latter.

create strategic capital alliances over time.

Developing is EXTREMLY capital intensive and there is a lot to it.. its not any were close to the same thing as wholesaling ( which is really just selling real estate without a license ) and flipping is being a contractor..

Developing is a completely different discipline and you need to know your stuff to get taken seriously and in this case you will need credentials.

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2 Reply

OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Originally posted by @Wayne Brooks:

Forget the flipping, and especially the wholesaling.....they are not related to developing in any way. Go work for a developer, that's how you'll learn.

Thank you, it looks like I am going to have to revamp another plan!

OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Originally posted by @Jay Hinrichs:

continue your education and get a DEGREE in the field there are some great programs out there.

Go to work for a large developer... intern at said developers companies.. work your way up the latter.

create strategic capital alliances over time.

Developing is EXTREMLY capital intensive and there is a lot to it.. its not any were close to the same thing as wholesaling ( which is really just selling real estate without a license ) and flipping is being a contractor..

Developing is a completely different discipline and you need to know your stuff to get taken seriously and in this case you will need credentials.

I have considered an internship from development companies. The only problem is, around here, my options are pretty slim.

Johnson City, TN · Member since 2014 · 586 posts · 705 votes

9y

Marry a rich man's daughter. Seriously, the most important aspect will be access to millions in capital. Your ability to successfully interact with those that can bankroll your projects is the key.

OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Originally posted by @Account Closed:

I think everything you stated are amazing ways to generate cashflow, creating rapport with various people in the business, and acquiring a wealth of knowledge of real-estate that simple research can't teach you. No one becomes a developer overnight and I think it's always a good idea to get in the game young, and it's good to see you are approaching it from a realistic perspective.

That being said, your main hurdle will be capital, which I assume is why you want to start flipping/wholesaling first. Many lending institution like to see some kind of experience in the field before they lend you money. It's an annoying little catch twenty-two, but there are many avenues to acquire funds without getting a loan. Overall I think you're onto something there. Your plan can always use some fine-tuning, as with every plan, but you're definitely on the right track. I highly recommend you find a mentor. Someone who is already at your end goal. The ones who are good at what they do are generally more than willing to talk to you about how they did things, so you can decide where you want to go from there.

Yes, the reason why I want to begin flipping is so I can build capital for my first small developement project, which isn't a bad idea at all. However, realistically, after reading everyone else's insight, getting the education and necessary experience in the industry would be a much better way to go about my plan.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Account Closed EXACLY if you have no training and education in the development field your first project could be your last... its a very very risky enterprise...

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OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Originally posted by @Jay Hinrichs:

@Account Closed EXACLY if you have no training and education in the development field your first project could be your last... its a very very risky enterprise...

The only problem is, how do you find internships if you have no prior real estate experience? In my area there are no internships available.

https://www.biggerpockets.com/forums/48/topics/429980-officially-financially-free-at-32----exciting-day

Steve K.

Denver, CO · Member since 2017 · 265 posts · 234 votes

9y

@Account Closed , while your ambition/goal is commendable, don't expect banks and investors to trust you with their money when you're a 20-yr old amateur with no experience.

I know of a success: a family friend didn't want to go to college. Instead went to a trade school....learned to be a carpenter, electrician and plumber. Became a general contractor....in the beginning on small remodels. Started fix/flipping on his own investments. At about year 15 or 20 years experience he became a successful developer in Reno NV, building luxury homes in his own 20-lot subdivision.

Personally, I get excited reading about young people who start out small with the BRRRR method, like Austin and William here:

https://www.biggerpockets.com/forums/223/topics/445367-full-time-employee-multiple-brrrr-side-hustle-2875-to-goal

At 2.5 years' into investing, couldn't either of them buy a vacant lot and finance construction of a "speculative" home for sale? They'd then be a small developer. The next step could be to buy 5 lots, then 20????

https://www.biggerpockets.com/forums/48/topics/429980-officially-financially-free-at-32----exciting-day

OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Originally posted by @Steve K.:

@Account Closed , while your ambition/goal is commendable, don't expect banks and investors to trust you with their money when you're a 20-yr old amateur with no experience.

I know of a success: a family friend didn't want to go to college. Instead went to a trade school....learned to be a carpenter, electrician and plumber. Became a general contractor....in the beginning on small remodels. Started fix/flipping on his own investments. At about year 15 or 20 years experience he became a successful developer in Reno NV, building luxury homes in his own 20-lot subdivision.

Personally, I get excited reading about young people who start out small with the BRRRR method, like Austin and William here:

https://www.biggerpockets.com/forums/223/topics/445367-full-time-employee-multiple-brrrr-side-hustle-2875-to-goal

At 2.5 years' into investing, couldn't either of them buy a vacant lot and finance construction of a "speculative" home for sale? They'd then be a small developer. The next step could be to buy 5 lots, then 20????

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Steve K. a developer by definition does not buy shovel ready lots for SFR contruction.. that would be a builder.

a developer in the SFR realm creates the subdivision and sells lots to the builders or builds it out themselves.

in the commercial world a developer will buy shovel ready and develop a commercial site.

that's kind of how I view it.. its semantics for sure

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OP

Williamsburg , VA · Member since 2016 · 15 posts · 1 vote

9y

Interesting. But I think everyone has missed my point so far. I do not plan on out starting out with a large complex project that requires millions of dollars at hand.

The wholesaling ordeal is not a way that I'm tying to gain experience to became a developer. Wholesaling will just get me started so that will provide me with the funds and connections necessary to began flipping properties.

So now here is a scenario for my beginnings:

After successfully flipping properties many times over for years at a time, I now have a decent amount of capital saved up. Let's say about 250k. By this time now I have found a peice of land for sale for 80k, it's half of an acre, zoned residential, and after studying the real estate market analysis, there is a demand for single family homes in the area. So now the plan is to develop a single family home to fit market criteria needs in the area. I would be partnering with a an experienced developer as joint venture so not only will I have a mentor, but I will be able to learn the ropes along side of a seasoned professional. Now it's time to secure funding. Of course I would have some "skin in the game", and the rest of the fiancing would come from venture capitalists. Not banks at this point.

This is how I would start. Then I would build my portfolio from that point on doing other small residential developments until I have a good enough track record to present to banks so I will be able to secure funding for larger projects that require millions at hand. No doubt that education is needed, but I think there was some misunderstanding after some of you read my very first post.

Steve K.

Denver, CO · Member since 2017 · 265 posts · 234 votes

9y

@Jay Hinrichs Thanks Jay; I stand corrected....you have better symantics

Steve K.

Denver, CO · Member since 2017 · 265 posts · 234 votes

9y

@Account Closed ....again, your ideas/goals are commendable. I wish you only the best.

It will take a very special experienced developer after those years; I hope you find her/him. Why does he/she need you? You have a few years' experience flipping, $250k and an idea on a 1/2 acre. He/she brings everything else and is supposed to do most of the work for part of the reward?

Not to throw cold water on your idea/dream.....but I have seen this from the other side. I'm reasonable successful at looking for/analyzing deals, cash and creditworthiness to finance them, wife is great at designing the remodel/build. Have inexperienced family members with no cash, bring nothing to the table, and want to "partner" with us. Might have done it, to help them jump-start their REI career.....but they wanted to tag along with no effort, no self-education, and share a free gift of $30k profit? Fell apart mostly because they had such a 'know it all' attitude and would have made horrible partners.

Truly...hope you achieve your dream....just make yourself an invaluable partner that others want to associate with......

Joe Moore

Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes

9y

@Marlon Thomas, Jr Get a job at Home Depot, Lowe's, Ace, or other building material stores and make friends with those frequent customers especially those who make large orders. You can also join local landlord associations and offer your services as tradesmen after you honed some type of building trade skill. Also you consider joining your local real estate group. I like your long range plan. You got the time and motivation. The hard part is the conviction to stay the course and the willing to expand on your idea of what it take to succeed. You will also have to build a good rating and a large credit line. All this is possible, but as you go along you will have tweet your plan as time will revel.

Christian Cramer

Property Manager · Kihei, HI · Member since 2016 · 85 posts · 97 votes

9y

Im in a position very similar to you. Here's my take on it - Only listen to the people that are in the position that you want to be in, and take their advice.

Rogers Smith

Developer · Covington, LA · Member since 2017 · 224 posts · 124 votes

9y

As @Jay Hinrichs pointed out, I think you are seeking advise on becoming a builder/contractor, rather than becoming a developer. It's odd, but all too often I see these terms used interchangeably on BP. It may be simply a matter of semantics, but for those seeking education, I think terminology is foundational to learning.

In the residential space, a developer buys raw land, subdivides it, adds roads and utilities and sells lots. A builder/contractor buys lots from the developer and builds houses on the lots.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Rogers Smith and or like myself I buy raw land get entitlements.. get a Infrastructure loan from my bank.. put in all the infrastructure.. record my final plat.. get vertical construction loans from my bank and build houses to sell to mom and pop !!! If I only bought shovel ready lots then I am a builder or GC.... when I take raw land and create a community I am a developer in SFR space.

Totally agree on your analogy.

and this is were it gets to be quit interesting.. you have 3 separate things going on ... Due diligence up front.. IE can the land be developed at a price that works.. ( most times no because the seller has no clue as to timing or what things cost these days).. WEre are you going to get the millions of dollars to put in the infrastructure.. Near impossible loan to get even for very experienced.

then were are you going to get 20 to 50 vertical loans...

all this adding up to average project needing 5 to 20 million.. ??? with 10 to 30% equity.. so 1 mil in cash is about starter in our market if you want to play developer..

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3 Reply

Rogers Smith

Developer · Covington, LA · Member since 2017 · 224 posts · 124 votes

9y

@Jay Hinrichs not to mention the months of delays by the permit offices and the not-in-my-backyard protest crowd. That's why I stick with building rather than developing. Bless you Jay for putting up with all that crap so we builders can build.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Rogers Smith in our markets we start with a Pre app meeting that cost 1,500.

then you have to hire your land planner for about 5 to 10k up front.

then you have to schedule your neighborhood meeting were you field all the NIMBY stuff and drags on for hours all about nothing.

You then hire your surveyor for boundry....

Once you have boundary and topo.. then off to your civil to design... this depending on project takes about a year to get to that stage.

In the meantime your going through land use planning and approvals at the city.. in a perfect world they are going concurrently.. planning commission meeting.. if its hotly contested then City council or county commissioners meetings.. protest.. appeals delays..

and you have not done any thing yet.

so for us to get to approvals and all land use approved 50k min.. to 200k or more.

then you go out and in our market its 40 to 50k per lot for underground...

and we close on the dirt once we have approvals and all appeals have run.. so cut a check at that point for 500 to 2mil in cash...

4 to 8 months to put in your streets and roads and get ready to build.

once that's all done you get a sign off from city and record your final plat...

your construction loans are now ready to drop.. and in our market 5 to 7 months to build a home ( HUGE sub problem..) simply not enough subs to meet demand.

then you go on market and sell and close.

start to finish 2 to 3 years.. Hit the market right like we have the last 4 years and you can make more in a year that owning 100 rentals for 20 years LOL.. but you do pay tax's but that's OK your making a LOT of money.. so just pay your tax's..

you miss a market and well you lose or stand to lose significant sums if not get wiped out.

so much more too it than I want to be a developer... LOL

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Kiara Thompson

Real Estate Investor · Scottsdale, AZ · Member since 2016 · 3 posts · 3 votes

9y

If you haven't read it already, read the book - the real book of real estate by Robert kiyosaki It's a great book about the general knowledge needed for all types of owning and / or developing income property

Rogers Smith

Developer · Covington, LA · Member since 2017 · 224 posts · 124 votes

9y

@Jay Hinrichs you guys have brass balls. I'll stick with building. Cheers!

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Rogers Smith this is why the bigger builders now Lennar Horton etc.. really only buy shovel ready.. they can't carry land on their books for that length of time..

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Ed B.

Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes

9y

How can I say this nicely? Hmm, I can’t, so here goes. You’re a blooming idiot. You reek of greenness, naivete, and ignorance. You speak in terms of “flipping” houses and wholesaling when you’ve probably never done either. And of selling them for a profit. Correction, and I suggest you learn this fast. You can only “Try to sell for a profit.” If you did enough things correctly, and your market timing was fortunate, and you had a little luck, you probably can sell for a profit. If so, thank your lucky stars but never take it for granted or get too cocky, because plenty of investors have lost money. Boatloads of money. Real estate is not always as challenging, interesting and enjoyable as you seem to think it is. Try making mortgage payments when you're paying out more than you're bringing in income. Try looking for investors with money and only being told "no." Try using your creativity to come up with a solution to get yourself out of a bad financial jam, yet the only options are bad and worse. That for damn sure will take the glint from your eye, the bounce from your step. You really need a few failures and setbacks, not to mention enduring some grinding moments like scraping peeling paint or cleaning toilets before anyone is going to take you serious about developing real estate. Good grief! Give me a break. By the way, why the hell is your account closed already, one day after posting?