How do you become a real estate developer?

[Agathe]

Okay let's say I have money

what exactly do you mean by knowledge? architecture? business?

I'm on my way on becoming a real estate agent but since I'm also in university, I wanna know what field I need to look in which would help me out in real estate business. Everyone here is advising to take finance classes but is there anything else out there?

 

[Razorguns]

Okay let's say I have money

what exactly do you mean by knowledge? architecture? business?

I'm on my way on becoming a real estate agent but since I'm also in university, I wanna know what field I need to look in which would help me out in real estate business. Everyone here is advising to take finance classes but is there anything else out there?

Well since i don't possess that knowledge, nor do i need to in my goals and realm of business -- i'll let others who do possess that knowledge, indicate which holy grail they got it from.

 

[bran987]

Okay let's say I have money

what exactly do you mean by knowledge? architecture? business?

I'm on my way on becoming a real estate agent but since I'm also in university, I wanna know what field I need to look in which would help me out in real estate business. Everyone here is advising to take finance classes but is there anything else out there?

Some schools offer Real Estate Finance degrees. That's what I got.

The hardest to do but most beneficial measure you could take as a student would be to get an internship with a local developer.

I got one summer before my senior year ended up working for them after I graduated and ever since. I'll tell you one thing, manny is right. Every single person in the real estate field wants to get into development. Our salespeople, the city employees I talk to, architects, even our tenants. It's amazing, but it's also kind of a product of the bubble we have right now just like everyone wanted to work in the stock market in the late 90's.

It helps to know about construction even if you want to be on the lending side. We have about 5 bankers from a public company on our jobsite on a weekly basis checking things out but that is rather unusual, we just happen to be at the butt end of a mid-9 figure deal. Weird to think about isn't it? Numbers that big. It's still scary to me. If you start out anywhere in development, it will be as an analyst, so it helps to have training in finance. You don't need training in architecture - waste of time. The totem pole goes:

1) Analyst (number cruncher, feasibility analysis etc.)
2) Associate (assist Project Managers and still do some Analyst work like training the new guys)
3) Project Manager (manage one entire development start to finish with profit sharing)
4) Managing Director (oversee 4 or 5 Project Managers)
5) Partner/Principle (contribute equity to projects, envision and originate deals, manage banking relationships, etc.)

There can be any number of each position, or none of some at all. For instance, my firm has no managing directors, just two Partners and then straight to PM's.

I'm an Associate right now, and after I get my MBA I can either go to work most likely as a PM (Project Manager) overseeing one of the projects on my own, or get some job with an institution who lends money.

Development is a ton of work, it's high stress, and high risk. But it can make you wealthy and you work with people who love to party hard and love the good life. Don't worry about how much money you are making at the beginning, that is advice MTS gave me last year and that I am finally starting to understand now.

If you have the knowledge of how to make one of these deals work, it is literally worth millions of dollars even if the money is not yet in your pocket.

Get a good grasp of numbers, discounting cash flows, budgeting, forecasting, basic finance degree shit. Study the nuts and bolts of construction in your free time on your own, you have to have a cursory knowledge if you ever expect to not get snowed by GC's and subs. That's a start - the internship will stem from those abilities. After you get it, grab as much responsibility as you can. These jobs are hard to find as most small firms are well... small, meaning not a lot of jobs, and at huge development companies you will simply be a cog in the wheel.

Good luck!

 

[Madcow2]

That was a really good post.

- as usual, I can't give Karma because apparently I need to spread it around to more undeserving people first as if positive reinforcement will improve their post quality.

 

[Agathe]

yea thanks for the info man

 

[MattTheSkywalker]

Agathe,

Bran made a great post, it should help you understand the business. And lol at your "hot is an understatement" post...it doesn't matter in development.

I work with a guy who started the real estate finance programs at the top biz school in the US. So his formal education was solid. His Dad was a GC and he grew up swinging hammers and really gets construction.

When i started working with him, I learned the business stuff pretty easily, but it took a while to learn the construction end of things. It might seem too "blue collar" foe a narive college kid with Trump-style goals (that's you), but believe me, if you don't know construction, you're going to get ripped off. Sure, you can hire people who know construction, but, you'll never know if you are getting rooked or not. How does that feel as a biz owner? Not good, sir, I can assure you.

Learn construction. If you want to be a commerical builder, learn how shit is built. it doesn't mean you need a to swing a hammer, but every corporate bank is filled with MBAs from top schools who don't know what a footer is.

Anyway, my partner started buying and fixing houses right out of college. He knew real estate markets, I mean really knew them, studied with someone who was #2 at HUD for a while. But that's formal education, you'll learn all that.

OK, so now you know RE market principles, and you know construction. After that, you just need to learn how these things are financed. That's basically a "learn on the job" experience, because as bran987 might tell you, every job is a little different, and you can't say they're all the same until you;ve seen all the little differences. (Did that make sense?) Sometimes landowners want to participate, sometimes they want to sell land, etc. From the financing standpoint, as an owner, the name of the game is risk reduction.

OK, you want to be a developer. You'll learn construction. You'll learn the RE market. You'll go to work for a developer and see how financing instruments are used for different jobs.

Now you have to learn a few more things.

(1) Patience. Find the right deal. Most developers fail. They ar elike venture captialists, they try to hit a home run every now and then to clear the balance sheet from all their losers. My partner has done over 15 deals and never lost money. he has walked from many many deals, including one here in jacksonville FL to build the developer's dream of housing / retail combined. He thought it was a loser. It was.

(2) Greed is not ego. Many developers are egotistical, and they usually suck. Trump is the most famous of all the ego guys; his developments have been almsot unanimously a failure. He has lost many buildings to avoaid bankruptcy, and really only avoided bankruptcy by threatening to fight his creditors every step of the way.

For the real deal on Trump, do some research about what the pritzker family has had to say about him. The older generations of Pritzkers were the hallmark of wealth and integrity; they're much richer than Trump and have zero respect for him.

it's not about ego. it's about dollars. You need to have ice in your veins when you look at a deal.

So..I think we got most of it, with some help from bran987. You've got a lot to learn, and if you want to be an investor, well, that's another class entirely.

 

[Crox]

Another important reason to understand the business from the construction side is its a hell of a lot easier to deal with tradesman when you can talk their language, get along with them and earn their repect. It will save you time and money in the long run.

I dont know how it is in the States, but here tradesmen are well paid and in most cases their apprenticeships took longer to complete the a University degree, they dont take kindly to guys fresh out of Uni thinking their the man.

 

[BUBBLES]

If you had a lot of money to buy a plaza then you would be able to afford the basics -

an accountant/financial analyst
a great lawyer
and do some personal research in the building/ real estate industry

good luck!

 

[freakzi11a]

Some schools offer Real Estate Finance degrees. That's what I got.

The hardest to do but most beneficial measure you could take as a student would be to get an internship with a local developer.

I got one summer before my senior year ended up working for them after I graduated and ever since. I'll tell you one thing, manny is right. Every single person in the real estate field wants to get into development. Our salespeople, the city employees I talk to, architects, even our tenants. It's amazing, but it's also kind of a product of the bubble we have right now just like everyone wanted to work in the stock market in the late 90's.

It helps to know about construction even if you want to be on the lending side. We have about 5 bankers from a public company on our jobsite on a weekly basis checking things out but that is rather unusual, we just happen to be at the butt end of a mid-9 figure deal. Weird to think about isn't it? Numbers that big. It's still scary to me. If you start out anywhere in development, it will be as an analyst, so it helps to have training in finance. You don't need training in architecture - waste of time. The totem pole goes:

1) Analyst (number cruncher, feasibility analysis etc.)
2) Associate (assist Project Managers and still do some Analyst work like training the new guys)
3) Project Manager (manage one entire development start to finish with profit sharing)
4) Managing Director (oversee 4 or 5 Project Managers)
5) Partner/Principle (contribute equity to projects, envision and originate deals, manage banking relationships, etc.)

There can be any number of each position, or none of some at all. For instance, my firm has no managing directors, just two Partners and then straight to PM's.

I'm an Associate right now, and after I get my MBA I can either go to work most likely as a PM (Project Manager) overseeing one of the projects on my own, or get some job with an institution who lends money.

Development is a ton of work, it's high stress, and high risk. But it can make you wealthy and you work with people who love to party hard and love the good life. Don't worry about how much money you are making at the beginning, that is advice MTS gave me last year and that I am finally starting to understand now.

If you have the knowledge of how to make one of these deals work, it is literally worth millions of dollars even if the money is not yet in your pocket.

Get a good grasp of numbers, discounting cash flows, budgeting, forecasting, basic finance degree shit. Study the nuts and bolts of construction in your free time on your own, you have to have a cursory knowledge if you ever expect to not get snowed by GC's and subs. That's a start - the internship will stem from those abilities. After you get it, grab as much responsibility as you can. These jobs are hard to find as most small firms are well... small, meaning not a lot of jobs, and at huge development companies you will simply be a cog in the wheel.

Good luck!

Where would you think a good place to start looking for an analyst position would be?

 

[MattTheSkywalker]

Where would you think a good place to start looking for an analyst position would be?

Analyst positions are similar in many industries.

Whether you are an analyst in RE, or at an investment bank, whether in mergers, trading, whatever, the job is the same: gather information that supports decisions.

Typically, one moves from Analyst to Associate at these types of places, which means that you, instead of gathering and turning over info, you now participate, (albeit in a small way) in the decision making processes.

Every industry has these people. If you want to align yourself with RE, develoeprs are all over the place. Consider this a bump for bran987.