In your experience, what background do the best developers usually have? I am a development manager and my background is in capital markets and private equity. I work with 4 other DMs and everyone of them is an architecture by trade. I feel like I am so behind the eight ball as a DM compared to them. Curious to hear if people find the best developers have an architecture background? Or even GC or law? Is finance not as valuable after the deal is underwritten?
Trending Content
| +107 | Real Estate = complicated + underpaid | 129 | 1h | |
| +57 | Who here has been pencils down for awhile or not buying? | 36 | 1h | |
| +29 | High achiever that doesn’t want to work weekends | 25 | 1d | |
| +25 | REPE Books | 12 | 2d | |
| +24 | Spreads over SOFR/UST | 11 | 3d | |
| +23 | “Major markets” | 8 | 8h | |
| +19 | Stagflation, and how it would affect real estate | 10 | 1d | |
| +18 | Stocks - What are People Buying? | 11 | 3d | |
| +16 | If you could go back… | 20 | 1d | |
| +15 | Can you exit from Fund to Asset management or Investment in Real Estate ? | 22 | 4d |
Career Resources
Construction guy turned developer, I'm still 100% convinced that civil engineering/architecture backgrounds -> finance backgrounds in development but tell that to hiring managers. Finance and modeling is brain dead easy, I still think that generating alpha on real estate either involves a significantly better understanding of the built environment or a significantly better understanding of the local market dynamics, the former of which can be taught moreso than the latter, CMV with obvious bias.
Follow up question: how have folks who entered development from the finance arena been able to pick up on the construction / design side of things ?
Honestly, this will sound like some totally BS style answer... but I think ability to manage and have broad vision are the two biggest traits. The top managers, entrepreneurial developers, or even project exec. types at major firms come from all over the place. Finance types, construction/design types, and the law types dominate as three broad buckets, and I've seen successful examples of all. Still, those in the top deal making roles, aren't doing any of that day to day. They may lean on their strength (F me when I have to deal with an architect type leader who can't get why it's too F'ing expensive to make this project their magnum opus, rant over!), but really they manage the team and all the various aspects while maintaining the broad vision and direction for the project. This is a skill set, not a "background".
For what it's worth, those that can be great "deal makers" seem to really knock it out of the park the most, and one could argue that a finance background (numbers) or law background (contracts) is better than construction/architect, but those actually deal with tons of true project management and dealing with clients, so they can actually be just as good in my experience.
My bottom line, play your strength, but really only leadership/management, deal making, and visioning (not "architecturing" I mean the actual sense of seeing a blank lot or old building and imagining what should be there, or being able to see how the city should/will grow and how this parcel fits into the city's ecosystem) are what matters. Those are not domains dominated by any one background.
I agree with Redever in that project management is the most important skill because development is project management. Ultimately your job is to coordinate a bunch of different team members/3rd parties and overcome obstacles in order to complete the development. And in addition to coordinating the team, building it or finding the right people. As i've done developments on my own, I will say there is a "skill" to finding the right people for the job especially when it comes to entitlement. Finding the right zoning attorney/consultants who know the city officials is key...sometimes a lot of projects are just dead in the water if you don't have the right person. However in terms of background, I would say it depends on the size of the project. If you are at the sub-8 units, then I would say construction/GC because you can reasonably finance the project yourself and dealing with the bank is simple, so GC'ing your own deal will save you a lot of money and you can walk into an open house and know exactly what can/needs to be done. However, if your deal size is like 50+ units, then probably finance and when I say finance I mean having the ability/connections to raise capital. At that level, you are going to need financial sponsors/LP's and being able to raise money is a skill...no money, no deals. And then between 8 and 50 units, I would say both are possible...my old boss came from a construction background and started off in the 90's buying 3-family homes and now he does mostly sub-50 units, but is working on entitling a 300+ unit high rise..but his construction background is obviously a lot less relevant now...as is his finance background (or lack there of)...he has a VP of construction and a VP of finance/acquisitions to handle all that...at this point he just provides the equity...dude's worth $120mm+. And then I know of a competitor firm who also works in the sub-50 unit space and the owner came from a real estate brokerage background...which I think leans more towards finance because his skill was likely more in acquisitions/financing deals and then hiring a GC to construct the projects.
Very much agree with above. The greater the size of the project, the more you have to rely on specialization of people for their expertise. Too much money going into a big project to risk rookie type mistakes. Smaller projects are more forgivable and easier to fix and that's where those with the construction expertise at the smaller scale and truly win.
I think something good to piggyback onto the above is that it’s also about knowing what you don’t know. You can’t know everything, but you’ll know enough to ask the right questions. If you know enough to ask the right questions, you can pick the right consultants and also manage the process / cut through the BS when someone isn’t telling you the full picture or making it rosy.
Most people only view the world through their own viewpoint. It is the development managers job to be able to see each consultants view point to bring the pieces together. They need to know which pieces are important and which are necessary (at this point in time or ever) in order to get the project done.
The tired cliche "a mile wide and an inch deep" is cliche for a reason, it's true. You need to have an understanding of every part that goes into a development. Your landscape architect might have a vague idea of how everything fits together but ultimately you want them to design the best landscaping on your budget and not think about anything else. Your job is to know enough landscaping to direct them, and enough of everything else to direct all the other designers/consultants.
I don't necessarily think a certain background provides the best base. I've worked with developers from finance, engineering and architecture backgrounds. The financiers were the most commercially minded and best at driving returns, but needed a strong technical person to support them. The engineers were great at solving problems, but often didn't factor in commercial aspects such as time value impact i.e. saving $X but losing Ybps on IRR as what was the cheapest decision was not necessarily the most commercial decision. The architects were the best at "selling the dream" and getting it through the entitlement process, but they were also the most emotionally linked to their buildings and weren't as cost focused as others given they had a greater appreciation for architecture. I've seen architects spend significant money on minor details that only an architect really cares about, and wont create the value on the backend.
The best developers I've worked with generally had one of each which balanced each other out. The architect got it designed / entitled while dealing with a tricky local authority, the engineer got it built on budget, and the financier made sure each decision made commercial sense while delivering other aspects of the business plan (debt, exit, operator appointment if necessary etc). FWIW, experience of the above is in Europe where MBAs / MSREDs are not common, in the US if the architect / engineer type has either they'll likely be a lot more commercial than you see in Europe and the financier type may not be as helpful.
Must be nice to work with "architectures". I assume you are the only one with a "voice".
May be a bit biased here but going to go against the grain and say the ones with a birds eye view who can structure and lead a deal are the most successful, and the tools that stem from a traditional finance/PE background are most useful.People tend to overlook the fact that developers are still investment managers at the end of the day and like to throw out there that a guy with engineering / architecture background makes the best developers. I think this is way off base. The finance people with a clear mindset of knowing what they don't know can often hire these roles out fairly cheaply and obtain many different opinions to validate their consultants viewpoint. At the end of the day, you need to be able to manage when things go wrong and creatively structure deals on a tight timeline to deal with your investors.Anyone can realistically get the hang of it but it's not "just" modeling that you need to pick up to learn the finance side. You also need to learn how to think like an investor, which is the same as being a PE guy realistically. You'll have PE guys running point on deals in any sector and they lean on operational teams to manage and provide insight into how to add value. They still are the composers of the musical, which is arguably the most important. Look at Elon Musk - you think his engineers are more important than his value add in structuring a team and executing the vision?
Largely agree with you. I'm admitting to bias a because my background is finance related, but I do think people with a deep understanding of value, the different levers of a deal, how to structure a capital stack, etc. tend to find their way to the top more often than other backgrounds. Can I manage construction as well as someone with an architecture/engineering background? Hell no. Can I hire the right person to do that? Yeah, I can. If I'm a single-person development company (they exist), I probably want a PM background, but anything of some scale, a finance background is pretty useful because it's much harder to hire out. And while modelling is very easy to learn, understanding the numbers at an intuitive level and having enough reps structuring a capital stack is really really hard to learn in development after a certain point.
A wealthy dad with a deep market rolodex to tap for initial fundraising & underwriting. That's been my key to success so far
Odit voluptas neque sed consequatur voluptate. Nihil minus itaque quis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...