Construction Over Finance for a Career in Development?
A bit left field here given that this is mainly a finance forum, but has anyone interested in CRE, and more specifically development, given serious thought to starting their career in a construction role as opposed to something more traditional like AM or IS?
Seems to me that if you're entrepreneurial and hope to own run your own shop one day, having the construction experience would not only save you a few points on the cost side of things, but give you a better understanding of the development process itself. To clarify, I mean by either managing the projects yourself, or having the knowledge to bring people into the fold that will run them properly. To me, this has much more long term value than most other positions.
I am currently in my third year of a co-op program (5 years total) and see more value in pursuing entry level roles in construction as opposed to the finance side. I say this hoping to go into development one day.
Thoughts?
Not a bad idea. I did exactly that. Although I hated it and moved out of construction rather quickly.
Just know yourself and what interests you more. You'll naturally succeed more where ever your interests are.
I would wait for cpgame to comment.
I would assume that people will differ in their responses based on their career track, but I would argue that coming up through the construction side of the business is FAR more valuable than the finance side (I came up through the finance side).
I just think a really good construction guy who understands basic financial shit is far more valuable than a really good finance guy who understands basic construction principles.
That's the side I'm leaning towards. I'd honestly say I have somewhere between a basic and intermediate understanding of analysis and modelling of RE deals, but I imagine it's easier to learn that in my off time than to learn construction side.
I always say to pursue what you like, as others here have mentioned. It will be far more sustainable in the long run and you wont have to pivot your career as much, if at all. You'll also succeed more often and faster. Regardless of which route you take, its likely going to take some serious time (I would assume 5 years minimum, more likely 10) before you start your own shop. If you hate (or even just aren't all that interested in) what you're doing, you won't last that long.
With that said, I started on the finance side and two of my best friends work for two of the major GCs and they do well. The work is ENTIRELY different. I would argue that the finance side is easier to learn, because its more general compared to construction. With large developments, there's quite a bit to coordinate with a million subs, change orders, etc., where everything can and will go wrong. In my experience, you can make a lot more earlier in your career taking the finance route. I would imagine you can get into an executive leadership position or become an entrepreneur earlier via the construction route, simply because there is less competition and experienced GC's are in very high demand. Additionally, as a construction professional, you'll know all of the key players and generally speaking, sourcing financing is the easiest part of executing a deal.
EDIT: To add that I agree with both @Malta Monkey" & Ozymandia . Great post OP
I definitely agree that you gotta do something you enjoy. I wouldn't want to wake up everyday dreading heading into the office/site.
That being said, I actually do really enjoy both sides. To me, there are interesting aspects to both. I have spent sometime with a GC who works on mainly smaller commercial projects and find the work to be pretty fun. It is literally the definition of "no two days are the same" as they are always in a different meeting or on a different site or working on something new, which is really appealing to me. I'd be willing to eat the lower salary for the first few years if it set me up long term.
Also, not to dump on the industry as a 20 year old, but from speaking with a few developers and GCs, I get the sense that it doesn't take a genius to succeed, but instead someone who is willing to put the effort in. I'm not calling myself God's gift to the Earth, but from my limited dealings with sub-trades and other PMs, I like to think I have the brain capacity to do well.
As you mentioned earlier, having the connections in the construction world would be crucial if I were ever able to go out on my own.
Thanks for the response! Really appreciate the input.
Aren’t most principals from the finance side though. What percentage of developers who go off on their own worked in the construction Industry?
Not a lot. I've seen more construction guys who want to play developer fail than the other way around.
Not saying you're wrong, but I'm not sure how accurate this may be. I agree larger developers generally come from a finance background and have experience putting together larger deals. However, the guys doing low-rise res or even smaller commercial projects are commonly (in my experience anyways) from some sort of construction background.
It depends. If you know that your path in life is to go off on your own and do some of your own fix up projects, then yeah you're better off just learning construction. Truth told, if you're flipping houses or smaller commercial properties and know your craft well you really don't have to worry about knowing how to build out a 10 tab financial model for each deal. You'll be able to spot a good deal when you see one.
Now not everyone is entirely sold on going off on their own. I just don't have the desire to stomach that type of risk so I would way rather go the finance route and work at a mega-fund with the guaranteed comfort of a six-figure salary. A bad year for me means that I don't get my target bonus, but I'll never lose my shirt. On the flip-side, a good year for me means I make $150K but it's going to take decades for me to ever become a millionaire.
You pretty much hit the nail on the head here. I don't see myself ever building a 50-story condo in a major market. I'd prefer to do low-rise res/simple commercial deals, which would obviously require less starting capital and be much smoother to run on my own.
Agree with the comp. To be completely honest, I'm a bit young, so maybe I'm naive, but in my mind, I'd rather eat shit for a few years out of UG and save my ass off than go into my second choice for the paycheck. Obviously the development path is a bit riskier, but it's something I'm (currently) willing to stomach. Hopefully, sometime in my early 30s I can do my first project and get my feet wet. I definitely see your point though. The guaranteed comp is huge.
Appreciate the input!
Absolutely, if you take a look at a lot of VP of Development job listings you'll see the required experience benefits either construction people (project managers) or lawyers (land use) turned RE rather than finance people.
One thing i'd mention is that it seems much tougher to break into the finance/development side of things from a recruitment perspective, but i'm sure YMMV and cpgame knows more than I do.
I'm going through a transition at the moment, was a laborer when young, civil engineering degree/GC job, currently working as a CM/Owner's rep. I definitely feel like it's hard to shed the "construction" aspect when looking for roles, and i've had a lot of headhunters/recruiters push me towards a CM roles even while explicitly looking for development roles. From the vibes from this site and a decent bit of job hunting, I feel like some sort of graduate degree is required for the pivot, where IS and AM may be more direct. Again, my only experience is from the construction side so take it with a grain of salt.
We have a similar background actually. I've done time both as a laborer and in junior-ish project mangagement roles. I'm not studying to be an engineer though. I wrongfully chose business school lol
I get what you're saying, and although I haven't been through it myself, I don't doubt what you're saying is accurate, at least when it comes to switching careers. I was more asking about it regarding my own developments. I have no problem working in construction up until I leave to start my own shop. Personally, I wouldn't have an issue with doing 5-10 years there.
Development firms are not all equal--some have the project leaders run everything start to finish whereas other have verticals (silos) where you're a specialize in some component of a project. I've found the construction experience is helpful for general project management skills (critical to running deals A-Z) because finance people are not project managers and that's a huge learning curve. Learning finance in b-school, after learning project management in the field office as a construction PM, is a great way to go.
Yes. To run your own shop and develop buildings, construction would be more valuable than finance. Harder to learn the nuances of construction I'd think
At the end of the day, you can survive becoming a developer without the use of excel. Does it help? Yes but it’s not necessary. To actually become one and construct a building, construction expertise is essential. How else can you really get it done without knowing the ins and outs especially on a smaller scale (flips/4 units/rehab) without the use of a GC. And even if you hire a GC, need to know the terminology and what goes into building or else you’ll get burned.
Anyone know what’s the best way to learn? Is it only through doing it yourself I feel like? Very entrepreneurial.
A lot of ground up development start up companies are founded by a small group of people with complementing skill sets rather than one-man shows who would need to be an expert in everything.
Agree with the comment above that if you’re doing small commercial rehab/flipping/custom single family homes, construction is better.
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FWIW - I've seen construction and/or design (architecture/engineering) experience be very well valued by developer firms recruiting at the associate or manager level. That experience is valuable if not required for many parts of the day to day job. The exception is the financial analyst role at the developer shop, but is that really a development role (debatable)?
The flip side, I've observed financial backgrounds (and items like brokerage, appraisal, market research, etc.) being much more valued for recruiting at the director/VP level. The more senior you are in development the more the job is a true "real estate" job requiring skills like investment analysis, negotiations, market analysis, etc. These skills are more likely developed in the "finance" side than construction.
In short, for "transitioning" to development at the junior level, construction may give an edge, at the senior level, finance or related may give the edge. To sum, I'd go with the field/job that is of most interest and enjoyment, most important as that is where you will do your best (this has been well said above). Just realize why each skill is valued and when.
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