Many real estate professionals want to develop their own properties at some point in their career. So what is the perfect path to developing real estate?
I’ve gotten this question a lot lately. It’s one that I’ve run past mentors of mine and one I continue to tease out myself. If you’re looking for a quick answer, you can quit reading now because I don’t have one. Frankly, I don’t think there is a perfect path for anyone. Of the development professionals I’ve worked with, they all come from various walks of life, disciplines, and levels of experience.
The diversity of answers I get seems to allude to the exact characteristics that make real estate development so damn exciting! As with other real estate strategies, development pulls one in many different directions—no day is really ever alike. The amount of people you collaborate with throughout the life-cycle of a project is lengthy. And they all have an important role to play in the project—of which you, as the developer, are the main conductor.
If you’re interested in real estate development, where exactly is a good place to start? Given my reluctance to nail down a specific path, here are some professions, skills, and backgrounds that tend to gravitate towards a career in real estate development.
Finance – Investment banking, mortgage brokerage, private lending
Why? Development is rooted in financial principals and can’t occur without them. Having a keen understanding of finance is crucial for any project. Because of their financial acumen, people in a financial role understand the financial risks involved in any project. Many finance professionals find themselves transitioning into real estate development because their skills in financial modeling, planning, and management are needed throughout the life of a project.
Commercial and residential brokerage
Why? Brokers know the pulse of the market and know how, why, and when a property sells. Developers that come from a brokerage background tend use their local knowledge to exploit market gaps and imbalances. Because of their intimate knowledge of rent levels, vacant properties, lease structures, etc. they can recognize certain development opportunities where others can’t.
Why? Development requires strict adherence to local, state, and federal laws. Developers often lean on their trusted legal council to guide them through these complexities. Having a background in real estate law can help any developer understand how to navigate this part of the process.
Why? Architects are responsible for designing and creating the physical spaces we all use. Because of their intimate knowledge of design, building construction, space utilization, usability, and space programming, architects have a vital skill-set needed to develop properties. Architects constantly work at multiple scales—from the high-level vision down to the specific details. This ability translates perfectly into development because developers are constantly switching gears between different disciplines and scales. The best developers I know, similar to many architects, are able to communicate their vision and then tell you exactly how the details will help execute that vision.
Why? One can finance, design, build, and lease a property all they want. But if it isn’t operating correctly, its value diminishes quickly. Property managers understand many of the nuances that make a property operate smoothly and efficiently.
Why? Ask any developer what stage typically takes longer than expected, has the most uncertainty, and can quickly stall a project and they’ll likely answer with the entitlement process (strong runner up is securing financing). Developers that come from a background in zoning, compliance, permitting, and other local government roles have a keen understanding of this process and can use it to their advantage throughout the development life cycle.
Why? Development, at its heart, is an exercise in creating something out of nothing. Entrepreneurs have skills that align quite nicely with real estate development. While their backgrounds might not always be in real estate or any of the professions mentioned above, an entrepreneur’s ability to plan, promote, sell, manage, and ultimately grow a company is directly transferable to development.
So there you have it. If you want to break into real estate development, you’ve got many options and opportunities to leverage your skills and background. There really is no tried and true path to developing real estate. Of the developers I know that are successful on a long-term basis, they all have a hunger for learning, are deeply passionate, and have deep knowledge of a specific discipline—then expanded their wheelhouse from there.
Photo: 4737 Carlin