Development v Acquisitions for starting own development firm

You are starting out, its simple:

1. Acquisitions: you can find a deal, run all the numbers, put everything together on a silver platter and go to investors with it. They can verify and decide if they like the deal or not. If you mess up once the building is purchased, not too hard for them to get a new management company.

2. Development: you are asking investors to trust you to develop a property from scratch with NO track record, NO experience dealing with the government officials you will definitely have to deal with to get permissions, NO contacts with developers with who you already have a track record with. 

You get the picture. Acquisitions are always easier at the start. Do a few of those, and build a track record. Then do a development deal in partnership with a known developer. THEN go on your own.

Good luck!

Depends on the type of deals you want to do. If you want to develop your own real estate then it would go to reason that development would be an obvious good experience. If you want to buy an existing property and hire out property managers and 3rd party contractors to renovate the property, then acquisitions would be the more obvious choice. It just depends on what you want to do. 

Analyst 1 in RE - Comm

What is the best path to raise money and start doing your own deals - Is it acquisitions (underwriting, financing) or development (delivery, specific projects)?

I've been an acquisitions analyst for 12 months and thinking more about going out on my own one day.

Assuming you have the relevant experience in one or the other, I think the obvious answer to this is development.

First off, development includes underwriting and financing - it's acquisitions, except you have to build the asset afterwards.

Second, the dirty secret to acquisitions is that unless you have a specific business plan in place which is fairly unique to you, the whole game revolves around cost of capital.  It's just not going to be possible to compete with someone who only needs to hit single digit levered IRRs.  Development... well, if you can lock down site control, you can raise capital.  And because of the additional risk, you won't find that it's always a "cheapest cost of capital" wins, because there are so many other factors that come into play.

That being said, acquisitions is an objectively "easier" business and you can do it on your own more easily at a small scale, because you can get more leverage and start with less expensive assets.

Development. You’ll get a more well rounded real estate education and actually learn to execute. Acquisitions is great and I love chasing deals, but you’ll just learn more of the business of real estate in development. Acquisitions is a mile deep and inch wide. Development is a mile deep and mile wide. You deal with acquisitions, operations, financing, project management, JV partners, etc. You see some of this in acquisitions, but not nearly in as much depth.

My opinion is based on the fact that most of my career has been in acquisitions / transactions and now I do development.