I have been interested in real estate development for the past 6 years and have been reading/studying the business on nights and weekends while working full time in the construction industry as a project estimator and now a project controls manager for a heavy industrial contractor. I want to separate myself from those that only have construction experience and have had the urge at several points in my career to switch careers and go work in real estate development as an analyst but have realized that while I feel confident in my ability to build real estate models, I would get smoked by guys my age with a strong finance background or someone with a MSRE.
So, at 28 years I am trying to be realistic and it is starting to feel like nothing will happen unless I start buying properties that have room for me to add value and build a track record at a small scale. I have around 90K saved up and have around 40k in my 401K that i would have no problem pulling from to fund my first deal. I feel confident that I could raise another 150k using immediate friends and family but the property would need to be a "home run" before some of them would trust the deal. The fear I have is with that being literally the only money I have, how will I eat for the next 5 years? Would I be better off taking a pay cut and working for a large developer? Then I would be 35 with a little more experience and more industry contacts?
Has anyone been in a similar position? If so, what did you do?
I am an analyst at a developer with a finance background and I invest on the side. The finance stuff is not hard to learn. Our project managers who are on site have construction management experience and an MBA, a combination of your experience with an MBA is deadly and significant, an MBA for me would be only for networking and stamping my resume, the coursework would be redundant. You could learn a lot investing on the side. Dont sweat the finance stuff, you can pick it u quick.
Just to piggy back off this, I bought my first duplex/first house 8 months ago, my housing cost when you look at principle paydown, tax benefits, etc. is $500/month, meaning if I rented my unit out for $1400, I would be cashflowing $900 a month while having a significant hedge against inflation (because I have 80% debt on this duplex that will be growing with, if not more than inflation because I bought in a good area (risk, expectation, i get it). but the bottom line is, I am trying to figure out why everyone is not aware of this. by self managing your properties, the risk adjusted returns are pretty unbelievable, it is not far fetched to be making 20% on your money with limited risk if you are self managing. The tax benefits are a whole other story if you can find investors with large passive income. look at 4 units and below to get non commercial financing for your first deal. Everyone I talked to who got into side investing always says the same thing: "I wish I got into this sooner"
I'm curious on the timesink/reward on work. I've done this in the past with my parents, however they were "unskilled" in the sense that they didn't have college degrees/traditional careers, allowing them to make this a full time gig. I always do the napkin math that labor cost is gonna be 2-3x on what your plumber/electrician/painter's gonna make hourly, and that money for non-college grads is really good.
How much work outside of your full-time gig do you put into this? Especially as someone who is "young" aka under 30, do you think it's worth it to manage rental properties or just focus on your career/Higher Ed? Establishing a rental in a location also forces you into a location for a while, do you think it's worth it from that perspective? I understand that everyone's got their preferences, but i'm curious to hindsight after getting into it.
A very intuitive question :) because the points you bring up, some are current situations in my life. I have a finance degree from a good school, I am working for a "prestigious" developer so I could fall into the idea of focusing on the career, I just really dont like working for people so I am always trying to learn and tinker. I also have estimated my net worth progression for my wife and I at our current savings rate (which is significant), and it is nowhere near the goals I had for even 5 years down the road. something has got to give, and it is the 9-5 slog, at some point the opportunity cost will become too high and I need to be ready to jump. As far as the time sink, it has been higher than expected, we have had to sound proof the home (for our comfort and the comfort of the rental unit), we did some updates to the rental per the request of the tenant, and I do some maintenance from time to time, we also take care of the landscaping, etc. To me, the ability to learn the small stuff in preparation to scale is important. Especially if I can cash flow, hedge inflation, and have opportunity for appreciation. The issue: my wife and I are in the process of moving across the country to a better location for our interests. We will either hold the property or do for sale by owner and we will basically wind up in the same financial position we would have been in if we had continued to rent, some will look at this and think, what an idiot, I look at it and say you miss every chance you dont take.