Best Path to Development/Major Renovation Projects
Hey Everyone,
I am currently an undergraduate student who is graduating this December.
I interned with a CRE development company last year and built a lot of base knowledge. I am currently working with an investor who was a junior developer on some projects over the past few years and is now trying to break out on his own. I am an analyst with him. I connect with brokers to try and find smaller deals to get under our belt with some investors we know before we try and do more capital intensive projects. I also underwrite the deals, send letters and cold call to try and find off-market deals. I've learned a ton from him just talking in the car or on the phone every day, but we haven't been able to get a project going which means we aren't making much money aside from his current holdings. I will begin to talk to him about a job and see his plans by December. FYI my end goal is to do my own major projects, either development or major value add deals.
My main questions are: Should I go be a broker and work with more buyers and more sellers so I'm not tied to one person? I am in talks with someone at a big firm that can provide many resources I don't currently have and I would get a draw.
Should I try to continue with my current job after graduating and hope to get some deals moving? The comp is currently no hourly pay, but split developer/acquisition fees 50/50 and about 10% equity in the deal. After graduation, there would most likely need to be a draw or a small base pay to live off of.
Or, should I try and apply to bigger development and investment companies to see more deal flow and not take any equity as quickly?
Thank you! Looking forward to everyone's answers.
CRE I'd love to hear what you have to say on this if anything. I've read through a lot of your posts and value your opinion, but wanted to see if you had anything specific to say about this situation. Thank you
If you really want to ultimately do large ground-up developments/value add, you will need the skillset for that (unless you just want to get so big you can just pay other people to actually do the work, in which case do the opposite of what I'm about to say). That means you will need to know how to acquire a site for development, how to manage a design team and other consultants, how to manage a construction project/GC, how to find and manage a leasing company or broker, how to raise equity and debt, how to solve legal and regulatory issues, etc. The only way to get that experience is to just do it, ideally at a firm so you're not at risk for the beginning.
Being a broker or an acquisitions analyst will give you great experience in those silos, but true development requires a much broader job description, just being able to connect to 20 different equity sources doesn't mean you'll be able to negotiate with a GC when they're trying to scalp you on change orders or be able to decipher the zoning regulations when acquiring a site so you understand what you can actually get entitled and permitted.
Any good developer will understand how to use OPM, other people's money, to their advantage. It'll be great if you can drop fat stacks into a deal, but it's better if you can get someone else to do it for you. And you might need to take a significantly reduced fee/promote on your first projects to gain your investors trust if you don't have a track record and aren't putting a ton of your own capital on the line, but what matters when getting capital later on isn't just the connections, that just gets you in the door, it's experience.
I agree with another commenter that there’s no substitute for direct experience. I am on a development team with quite a bit of responsibility and there is truly simply no substitute for working on a project from start to finish.
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