A real estate developer is a person who builds or renovates an existing property from the ground up. Such projects include residential properties, commercial real estate, and even industrial properties. Projects may be as tiny as constructing a single-family house, or as large as redeveloping a whole neighborhood in distress.
How to become a developer in real estate in 8 steps
- Know your area
- Find your niche
- Get the gist of the rules
- Protect yourself
- Create your team
- Find investors
- Get to work
- Know how to market yourself
To become a property developer you don’t need a formal education, but successful developers of residential and commercial real estate will surely have drawn their education from experience. That said, having your own company for development and looking for investing customers doesn’t rely on a certain level of education.
However, in a particular field, certain real estate developers have earned formal education, becoming a commercial real estate broker, general contractor, or residential real estate agent, both of which require a specific process of education and licensing. Or, they might have worked for a company that specializes in construction or property management. Having experience in various areas of the real estate market — from lathering on plaster to leasing — can certainly help you be the competent manager of an investment property that is being built from the ground up, particularly when it comes to more multifaceted projects such as industrial investment or mixed-use development.
What Does a Real Estate Developer Do?
The exact ins and outs of what a developer of property does can differ by project. Essentially, developers of real estate are responsible for the planning, financing and execution of real estate projects. Although they may not be on-site installing drywall or writing floor plans, they are the operation’s brain and are responsible for ensuring that all of the pieces work successfully towards the end goal.
A real estate developer is responsible for finding land or property during the planning process. Architectural plans need to be drawn up, both for new construction projects and for the renovation of existing buildings. Permits need to be secured so that the project can proceed without a hitch.
A real estate developer would need to secure some funding in the financing process. They may put their own funds in. They can look for other sources of funding, such as real estate investors. These investors may be in their professional network, or they may even be complete strangers. A good lawyer will of course draft a contract and build some legal scaffolding that protects the rights of everyone.
In the implementation process the project will move forward once the preparation is completed and the funding is locked down. Contracts with the construction crews would need to be developed, which can become a challenging enterprise with diverse teams on larger building projects. Often this is the toughest part of real estate development, and the part that puts a project behind schedule — so the best real estate developers are professional on-the-ground managers as well.
How to Become a Real Estate Developer in 8 Steps
The idea of real estate development and real estate investment is confused or conflated by many. In reality, a real estate investor may also be a real estate developer, but the development of real estate is more focused on the process of producing real estate that creates cash flow, while investment in real estate is more focused on the management process.
1. Know Your area
There are many external factors which can affect a project. Some are as simple and predictable as the environmental cycles, for example considering the effect of weather on work. Others are more difficult to classify but no less valid: Is the town a hot destination, or a desolate wasteland? A successful developer needs to know the environment in which they work, from the landscape to the socio-political climate. This is not a recipe for financial success to build thirty parcels of single-family housing in an environment where young people are looking to move into apartments.
2. Find your niche
Dabbling in too many real estate areas could have you be seen as an expert in none of them, which is harmful to the confidence of investors. Over time, you may be able to branch out into a number of areas, but you’ll want to select one real estate area and become good at developing it when you start.
Single-family housing is different from multi-family housing which is different from retail housing — not only in terms of permits and regulations and industry, but also in terms of design and construction. Will you be specializing in affordable housing that will sell directly to future owners? Will you be specializing in remodeling to increase the cash flow of an existing investment in commercial real estate? In the real estate sector there are several different ways to be successful.
3. Get to learn the rules
Developers have a long list of laws and regulations to abide by. Although it’s been different in the past, there’s not a single U.S. area where you can just build what you want, how you want. Every region has its own local zoning and building codes, as well as national and state requirements.
These requirements are not put in place to complicate development — they are created with a genuine interest in protecting human life from averse disasters such as fires and avoiding a deadly structural failure. Know the rules and adhere to the codes. Work done “under the table” will be coming back to bite you — and maybe others. Make sure you understand the legal scaffolding around your building before making any improvements to the land under your management, or pay an attorney to understand it for you.
4. Protect yourself
You don’t want to be carrying out this type of business under your own name, particularly considering the number of things that could go wrong. Investors can come knocking at your door to get their funds back if projects fall through. Accidents may occur on the construction site. Projects can move off schedule and over budget, endangering you and your goals. Hire an attorney to protect you and your properties through the entire phase of real estate growth. The best way to do this is by forming an LLC, but if you’re developing larger ventures, a more complicated tax strategy may be counterproductive to your financial interests, maybe by creating a company.
5. Create your team
Even if you are an accomplished architect, land surveyor, and contractor, you can’t do it all yourself. That may be the most important aspect of any productive phase of real estate growth. If you’re going to have to fire a key member of your crew, or they’re going out on you, you’re going to get stuck with subpar work or even a project that’s halted. Make sure you’ve got reliable lawyers, contractors, architects and real estate agents lined up to get your job done from start to finish. It certainly helps to have someone on board before you start, who can help you navigate capital gains tax strategies. Behind them are a strong team of the most successful real estate developers.
6. Find Investors
In truth, there should always be more investors to look for. Everyone you meet is a potential investor, so keep that in mind and make contacts as you network.
Always look professional, bring business cards, and have a website that highlights professional photography of your work. You don’t need to be a professional photographer to get high quality photos. Applying free lightroom presets to your images is an simple way to correct the lighting and give a seamless look to your real estate pictures.
You can start the process of tapping into your network for actual cash once you have your project concept formed and a knowledgeable team are ready to create.
7. Get to work
Get to work — and see to it that everyone else does their job properly. A real estate investor can (somewhat) afford to turn over their cash to a real estate developer who knows what they’re doing, and doesn’t look back. They should definitely have a real estate asset management department in place to look after their investments, after all. But a property developer can’t afford to be hands-off. They have to be involved in handling a project, or risk seeing it turn out to be a failure.
8. Know how to market yourself
When your project is over, you need to find customers so you can move on to the next project. Marketing is a multifaceted mechanism that can include paid advertising, word of mouth, social media and blasts of email. Marketing also involves learning how to build an engaging portfolio that will draw potential investors or maybe a high-profile real estate business.
How to Become a Property Developer
The development of real estate is perfect for those wanting to develop a building project from start to finish. It’s also a great way for smart people to get interested in real estate with no capital — they can build a property while others are fronting the cash.
Real estate development is a lucrative field and real estate developers have been some of the wealthiest, most financially influential people in our era. Magic Johnson, Steve Wynn, and Jeb Bush are just a few famous real estate developers whose work has changed many American cities’ skyline and built huge wealth on them.
It can be very lucrative and gratifying to become a real estate developer. If it sounds exciting and satisfying to think of constructing a home from the ground up, or renovating an old neighborhood into a vibrant urban center, then real estate development could be the area for you. Before you get into the field, you’ll want to create a legal system that will protect you and your personal property against litigation. You would either want to create an LLC or a company to restrict your own personal liability, depending on the scale of your goals. You should also appoint a registered agent to remove all legal headaches, allowing you to focus on the aspect of your business’ real estate development.
The real estate business was around for as long as there was a land market. You can tap into the financial power of the market by developing property with the right amount of experience and education, whether it’s residential, commercial , or industrial — and let others worry about fronting the capital. If you enjoy creative and managerial activities such as building and capturing a team, the creation of real estate can be better suited to investing in your land. Just note the value of getting yourself with a good team that includes, of course, sound legal advice from qualified advisors.