Development Crash Course
Any recommendations for resources I can use to get up to speed on the real estate development process? A real estate development for dummies if you will.
I’m potentially joining a start up shop as the “finance guy” and I’d like to get sharper on the actual development side of things. I have modeling courses and the guy I’m joining has given me some of his old templates so I feel confident I can get up to speed on that side of things. He’s also well aware he’s gonna be “showing me the ropes” but I’d like to do more on my end to get up to speed faster.
Are you asking specifically for help with learning to underwrite development deals, or for ways to understand the development process better in general? What's your background?
I would spend some time picking apart other models and learning how they work, what assumptions drive what outputs, all that good stuff. Other than that, my experience has been every firm has their own underwriting model (if they even have a template!) so I wouldn't sweat it, they'll teach you what you need to know.
As far as general knowledge, I don't know there is a great single resource. You learn by doing. You might pick up a couple of real estate focused textbooks (linked at bottom since it's screwing up formatting) - you won't learn anything super useful, because every deal is different, but they can be really helpful for understanding basic concepts and jargon. Especially on the construction side, which you probably won't really touch, but having a decent understanding of will be absolutely fundamental to being good at your job. I'd argue that the two most important things to understand to go to the next stage of your career (e.g. not just pumping out underwriting models) is the construction side, and the tax and legal side.
https://guides.nyu.edu/realestate/textbooks
Coming from investment banking (corporate not real estate) so really looking for materials on the general development process. Feel like learning how to underwrite deals I can pick up from modeling courses / going through old models… which from the work I’ve done so far seems fairly straightforward.
You're going to have a difficult time finding exactly what you're looking for. So much of development is interpersonal and comes down to finding creative ways to get people to do things you need in a timely manner.
Can you convince an architect that there are design options other than "the most expensive thing in history" or "depressingly copied beige rectangles?" Can you get your superintendant to actually be the tough guy he thinks he is and stop making whiny delivery excuses? Can you convince the 70 year olds on the town council to approve your project even though there are other 80 year olds in the audience wearing t-shirts that say you eat babies? Can you convince utility companies to demo the pointless lines intersecting your parcels even though unlike most vendors, you don't actually have any leverage on them, and half of the lines on the pole belong to companies that haven't existed since you've been alive? Can you convince your property manager that yes, you can increase rents 3%, and it's ok if some of your tenants don't renew as a result, even if that means she has to work a little harder to get new tenants? Can you get your maintenance man to actually pick up trash and care about how the property looks?
There's no real resource on that, because it all comes down to getting to know these people as people, learning what they care about, finding ways to align your goals, and winning them over while you secretly think most are morons. They think you're a moron too. It's the circle of life.
Fair. But for like the legit basic basics and lingo and process… I think some of the resources the other guy sent would be helpful. Lol at the moron comment
It would honestly be helpful if you asked the guys at the firm to sit down with you, pull up a schedule, and have them walk you through (on a high level) what occured at each stage of the deal. Could be something like the person giving a high level overview of:
Initial Pursuit
Due Diligence period / initial business plan
Closing of deal
Engaging consultants / selection of initial consultants, reasoning behind Design build or Design bid build
Drafting of Design Development (DD) set (25%, 50%, etc etc)
Permits
Construction Docs (CDs) (25%, 50%, etc)
Construction / Construction Admin
Issuance of Certificate of Occupancy (CO's)
Lease up
Disposition
Having him walk through what occurred on a high level for each major stage of the development would help you understand what to see / think of when you're at the firm in my opinion. I'm most likely missing a ton of stuff as I'm doing this from memory but it should help fill in gaps lingo / process wise if that makes sense
Love this. Super helpful!
As others have said, there isn't a single, authoritative go-to source for this. You may find some books helpful. I recommend John McNellis's Making it in Real Estate and Bill Poorvu's The Real Estate Game.
Another thing that you might find helpful on the entitlements side is to watch the permitting processes for other projects of the type you'll be working on. Nowadays it's common for municipalities to record the public hearings and put them on YouTube or a municipal website. If you know of one or two projects that were recently permitted, you might be able to find the recordings of all of the public hearings for the permitting and watch them. You'll get a quick sense of what they initially submitted, the comments they got from board members, outside experts, and the public, and what changes they made before getting approvals.
Also: go to construction sites as often as possible. If your firm has projects under construction, proactively reach out to the construction personnel and get access. Consider going frequently early in the morning before normal office hours. Seeing construction will help you learn how to manage construction, but it will also help you manage design (drawing what's going to be constructed) and permitting (much of which focuses on technical aspects of construction, like stormwater management).
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