How to become a Real Estate Developer
There are easier ways to make a living than becoming a real estate developer, but if this is what someone has determined to do, there are several ways in which to go about it. The first is to go to university or college and get a degree in architecture or architectural technology. An engineering degree can be helpful, but it does not provide as broad an understanding of the construction industry. After graduation, one should work in an architectural firm or perhaps the planning department of a municipality in order to learn the ins and outs of the approval process that is an integral part of the real estate development game. With three to five years of schooling and another few years of construction or municipal government experience, one is ready to apply for a job in a real estate development company.
Another way of becoming a real estate developer is to approach it from the financial side. Financing is the most critical aspect of real estate development and should never be underestimated in importance by those specializing in design and construction. If the numbers don't add up, it doesn't matter how wonderful the plans may be, a development project will not fly.
There are those who would say that it's all about location, location, location. This may be true, nonetheless all the ducks need to line up before setting the wheels of a development scheme into motion, and the most important ducks involve financing. Getting a degree in economics may not be essential to becoming a real estate developer, but gaining a thorough understanding of construction cost estimating, relative property values, and the timing and sequencing of projects and their impact on costing can prove to be the difference between success and failure.
So far, the assumption has been that the individual interested in becoming a real estate developer wishes to do so through the vehicle of an existing development company. For those dreaming about starting their own real estate development business, the first thing they need to know is that they require deep pockets, or associates who have them. Real estate development is not cheap and cost over-runs, especially as they relate to delays in the approval and construction processes can be fatal.
Let me quickly cite a personal example. Years ago I was involved as a partner in a small project where we failed to obtain municipal approval for additional units in a residential project that would make the difference between a profit and a loss. Because money was tight, we chose to sell rather than lease our project and wait for more favorable market conditions. Had we been able to hold on to our property for another six months, we would have caught a surge in real estate prices and sold at a profit. Instead we lost money.
Real estate development is risky at best, but there is a tremendous satisfaction in seeing a building rise from the ground and come together as a finished product. The larger the project, the greater is the satisfaction, especially if it makes money. It is easier and usually more profitable to speculate on existing properties, but they do not bring the same sense of accomplishment. Many developers started by buying and selling properties and eventually made the transition to development. This is still a good way of getting one's feet wet.
Almost anyone who's willing to take a risk can become a real estate developer, but to be a successful developer one needs to keep several things in mind. The first is the financing. As already has been stated, this is the most important aspect to any project. Successful real estate developers should be concerned with aesthetics and creating high quality projects, but not at the sacrifice of their budget. It is sad to see some projects incorporate wonderfully innovative components such as geothermal heating systems, or experimental "green" features while driving their builders to the brink of bankruptcy because of the "unknowns" factor.
The most successful developers tend to be dispassionate. Perhaps this is why those who focus on commercial real estate have generally fared better historically, because it is easier to be dispassionate about properties not characterized as the "roof over one's head". Residential real estate always tends to have a greater emotional attachment along with its inherent pitfalls.
Finally, I would recommend that all serious developers take an active interest in the municipal and regional planning processes in their cities and neighborhoods. Attending public planning meetings and town hall discussions is not only good from the perspective of being informed, but it also offers opportunities for input into the directions of growth that communities will take.
Planners and politicians do not necessarily have more insight into the planning process. They often get bogged down in petty politics and are distracted by the NIMBY's to effectively do their jobs. They often need some help, whether they chose to recognize it or not. Any member of a free democratic society has a right and at times duty to become involved in the planning process.
With the energy and environmental crises facing America and the world, private real estate developers can have a positive impact that can alleviate many of the problems caused by poor planning. Nodal development and intensification of land use can both reinforce a sense of community and make for more efficient land and energy use than the prevalent suburban model still being stenciled across America today.
The sixth sense associated with successful real estate developers has traditionally involved a natural feel for locating properties of greatest potential value. To some it may come intuitively, but there is a bit of a science to it. It involves a balance between nature and man-built structures as well as open space. It is something that may be viewed as the interplay of man-made and natural infrastructure. For developers who both want to have an impact on society and make money in the process, I would suggest that getting a handle on this would be a good place to start if they are serious about a career in real estate development. Apart from this, all I can say is good luck in reshaping the cities of America and the world!
