Real estate development
What’s the best route if you want to one day build your own real estate development company? Masters of finance with concentration in real estate or masters of real estate development or MBA in finance/real estate?
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Literally does not matter. Your job and experience are way more important. I will give you 3 examples of very successful developers who did not go through any formal training/schooling nor have the "prestige" nor pedigree that people on this website rave about.
1.) My former boss: Immigrated from Europe in the late 1980's and started in construction (did not go to college). Started acquiring triplexes in my city in the early 1990's and moved to larger and larger properties throughout the years doing value-add deals. Eventually started doing ground up development ranging from 3 units to 50 units in recent years. Has a portfolio worth about maybe $300mm-400mm? Net worth probably round $150mm
2.) Competitor to my former boss: Went to a "severe non-target" (as defined by this website) and started as a real estate agent in the early 2000's. Eventually opened his own brokerage and slowly moved into property management and development. Not sure about their exact history, but I assume started off value adding/developing duplexes and triplexes. Similar to my former boss, today he develops anything from 3 units to 300 units (most developments in the 9-50 unit range, but recently permitted their largest development yet ~350 units with retail, ~350,000 GSF. This guy has incredible creativity and vision. His ability to create value is unreal. I have almost bought a couple properties from him and his ability to increase the cash flow and value of a property is ingenious. I've seen him increase a properties value from $2mm to $4mm in 2-3 yearst. I arguably think this guy has even better vision than my former boss
3.) One of the fastest growing developers in my city: Went to a "semi-target" and worked in back office at an investment manager. Bought his first triplex in 2010 and did the whole BRRRRRRRRRRR (i forget how many R's there are). Did a couple decent triplex reno's between 2010 and 2016 (maybe like 3). Struck gold with a triplex in a fast growing market in my city - ended up renovated it and making $600k upon condo conversion. Quit his job to do real estate full time. Between 2016-2020 partnered with a well known mid-market LP in my city and renovated/developed around 15-20 projects ranging from 3 - 9 units in this very hot market. between 2020-2023 started doing 50+ unit developments. To date he has recently permitted his largest project yet, ~400 units. This guy is only 35...
So as you can see whether you are MBA, MSRE, Masters in Finance. Does not matter. What really matters is real estate experience and capital. I will admit though that all 3 of these guys operate mostly in the mid-market. If you are trying to become the next Tishman, then yes your best bet is to climb very high in a top developer like Tishman, then branch off and raise LP capital and assuming you have the political capital by then you can pursue those 500 unit developments, but in my opinion, this path to starting your own development firm is much more difficult. Real estate is very political especially at the big leagues. Sometimes its just dumb fucking luck that you make the right connections/promotion. Whereas all three of these developers I mentioned, in my opinion, had more control over their destinies. They didn't care about being the biggest baddest developer. They just cared about making money. Some people shit on triplexes, thinking that it's too small. But it is a lot less competitive and you can actually afford one on your own potentially. As they did more and more triplexes and made money, they then had the capital to pursue larger developments. I've worked for a large developer like Tishman and honestly I much rather be one of the 3 developers listed above than one of the partners at the large developer.
What was your experience like at Tishman Speyer or were you at Tishman (that owned AECOM, more hospitality focused).
I wasn't at Tishman, but the founder of the development firm I worked for was an MD at Tishman and partner at another large developer before starting his own firm. They are one of the largest, if not the largest, developer in my state. I wrote a bit about my experience in my response to 22percentirr here:
https://www.wallstreetoasis.com/forum/real-estate/building-personal-rea…
But long story short, I hated it. Now I am not saying working for an institutional developer is bad, it just wasn't for me. Also the reason why I hated it so much had more to do with culture than the work I think. The work was mind-numbing, but my managers were terrible, passive aggressive, and just had no chill. The partners were great, but middle management sucked. Happy to respond to any specific questions you have
thought your post was pretty insightful. what were some examples of how your former boss was genius/creative about increasing income? i’m genuinely curious about the stories
Former Boss: He has massive fucking balls and is a "first mover," meaning he is the first to begin investing/developing in markets that are known to be rough areas. This is a very risky strategy because you don't know when/if these markets will gentrify. Once a market has gentrified, he moves on to the next market. As for specific examples:
1.) In 2005 he acquired a rundown office building in, what was then an industrial part of town, for $17mm. In 2006, the city announces one of the state's largest redevelopments (30+ acres, 8mm SF redevelopment) of this industrial area. He puts in $2mm of capex and sells it for $45mm. To date, that property traded in 2020 for $115mm.
2.) When I was working for him, he was a first mover in a part of the city that the city wanted to gentrify. He bought a single story, 3600 SF, retail building for $2mm in October 2019. He put in some small dollars to renovate and split it in half. Everyone thought this area was only worth ~$45/SF NNN. By March 2020 he has 2 LOI's from BofA and Starbucks for $70/SF NNN...he then went to the bank to cash out refi just based on those signed LOI's and the bank appraises the property for ~$4mm
Competitor to Former Boss: I've seen a couple deals where this guy has significantly increased the cash flow of properties, but there's one that sticks out. He acquired a 7 unit property with the roof area leased to a billboard company for $2.6mm. He did some renovation of the units to boost the cash flow, but the real pop in value came from the billboard. The billboard lease still had some 10-20 years on it at ~$5000/month when he bought it. Somehow he was able to renegotiate the lease (I think he found a loophole), to $12,000. The property is now worth ~$4mm
Neither. Finance is, without question, the least important part of the development process. If you want to work for a fund, maybe that's useful, or if you're trying to transition from some other finance-heavy role like IB.
Go work. Work for a developer. Work for a public agency. Work for a general contractor. All of those will give you knowledge and skills and connections that will one day be useful. Drinking 4 nights a week for two years while you learn how to build a waterfall and eventually get handed an MBA diploma is going to do you very little, except to set you back a couple years while you party it up. If any degree was important, I'd say accounting and tax planning. That I could see being very useful.
I would love to agree with this, but I have been doing construction for the past 3 years and breaking into development without any finance background has proven to be very hard. I maybe could have done more networking, but in the end I have decided to pursue an MSRE this fall and quit my job at the large GC I am with to get my foot in the door. Just adding my two cents as someone who wanted to "go work" for a developer.
Did you do any networking? The tenor of your post is "I worked as a site super for 3 years, no one offered me a job, so I'm off to grad school."
At some point you need to do some outreach no matter what your role is. I guarantee you, you won't land a job out of grad school unless you do some networking or on campus recruiting, either...
Half of being a great developer is also just having the balls to do it. In REPE, we over analyze development. Its all about the execution, that is very difficult to do.
This is the realest comment I have ever seen on this website
The developers I met had backgrounds that varied a lot.
One of my past brokers owns 50+ buildings in the city and was developing SFR's, small condos, mid-rises, and high rises. They also helped developers with their projects. He had a biochemistry degree in college and started out as a real estate agent. I know that he partners with a GC. He always emphasized that sales was #1 and that he has been focusing on sales since he was a kid.
I know of another local developer who started out as a real estate agent who then built luxury infill homes and then did 10-50 unit condo developments in the suburbs.
One of my mentors started from nothing and partnered with a real estate developer. Today, he built over 80 retail buildings.
One time, I was sitting at an open house and an agent introduced me to her husband who is a developer. He built his first two buildings (70 & 100 units) in Oakland and had a lot of experience at Greystar as a development manager and working their capital markets team.
I can’t emphasize enough how much more important experience is than a degree in this business.. I’d find a newer company with relatively experienced partners. Think guys in their early or late thirties who have been senior level management but are now going out on their own. At a small upstart your chance of getting exposure to all facets of the business is far greater than at a big company. When you eventually go out on your own you’ll either need to be proficient in all aspects of the business or find partners who can compliment you. Best of luck.
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