Path to Becoming a Real Estate Developer

Hi guys,

I was wondering how to become a Commercial Real Estate Developer from my position. I am a residential real estate agent in SF (I know I'm looked down upon by CRE brokers... , but at least the median price for a home in SF is a million) with few years of experience and I'm staring down my future path with confusion. Should I ...

1) Go back to school to get a MSRED to learn finance and gain contacts to gain a job as an analyst in a development company after...
2) Keep working until I gain enough capital, investors, and contacts to make my own projects...
3) Somehow find a job with a developer (I have a non-business background).

I know it may be a super noob question. Any advice would be helpful.

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Comments (27)

Jan 26, 2016 - 4:01pm

Depends what you want to develop, but if product type is not as important to you then there's nothing wrong with staying in residential sales and making good money and eventually doing your own project(s). I have seen condo developers in places like NYC who started out selling condos.

Jan 26, 2016 - 5:21pm

To prospie's point, "developer" is a loaded word. A commercial real estate developer makes cost estimates, hires contractors, pulls permits, manages a budget, manages the property while under construction, and really just manages the PROCESS of building a building or a development. A lot of people confuse being a developer with being a contractor--the guy who (organization that) actually hammers nails. If you want to be a CRE/multifamily developer in this day and age, you need to go to work for a developer and learn the trade--if you become good enough and learn how to raise money (debt and equity) then maybe down the line you can go out on your own and develop the dream projects.

If you want to do 10-unit townhouse developments then more than likely you are going to do it as an investor where you hire a fee developer (builder) to do the actual building since I doubt that you're going to go to work for a homebuilder and learn how to build a house. My guess is this is more in the line of what you're thinking about ("hey, there's this cool neighborhood in San Fran that I'd love to put residential units in").

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Jan 26, 2016 - 9:15pm

1a. Network into a development company
1b. Get a MBA or MRED and then get hired at a development company
2. Work for a while. Gain experience. Gain contacts. Gain success.
3. Find some partners and raise some money (by far the most difficult part)
4. Develop something
5. Profit (hopefully...)

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Jan 26, 2016 - 10:57pm

Do you want to be a developer? Or just be rich? I see a lot of this in SF. Developing isn't easy, but it's an easy way to lose money. It's the trend to develop condos right now. I'd suggest just getting into a company like Polaris, where you court developers, and sell their condos. Make loads of money, learn about developing, and take none of their risks.

Jan 28, 2016 - 3:43am

I wanted to create my own buildings as my end goal, mainly apartments and condos. I wanted to explore different possibilities, design, management, smart growth, entitlements, and everything. The whole process fascinates me and stimulates my mind. I want to take a unique vision and make it into reality. I don't see myself being an agent my whole life by cold calling, door knocking, internet marketing, open houses, and etc. Making a butt ton of money would be great too, but that's not my main motivation.

Jan 30, 2016 - 2:12pm
Pokemon Master:

Why is that? I imagine condos would be simpler to develop than say something like industrial space. But that's just a guess.

Most industrial buildings are pretty basic to build...grade level, tilt up, easy. Maybe someone with more extensive knowledge of industrial development can chime in, but infill MF and condos are much more complicated IMO.

You typically build condos because the market has priced out MF deals which means you are nearing the top of the market. Condos are also much more expensive to build then an apartment. The codes you need to follow and the materials you will want to use can be very different and much more expensive. You need special insurance. You need to put a map on the property. You need to hire lawyers for you CCRs. You dont want to get stuck in a down market with a product you can't sell and cant lease at a rental rate that makes you money. However, the biggest problem with condos for an owner, developer or GC is the liability associated with it. You are on the hook for ten years after you build and sell. High litigation. People running your HOA dont know wtf they are doing and will look to you for every issue. I know many developers who have built condos who will never build again. Many also are on the HOA boards until the ten year period. Product types like the Small Lot Subdivision in Los Angeles have sprung up to counter many liability issues you have historically seen with condos. Condos can have their place, you just need to know what you are doing.

TLDR: Condos come around at the end of a good market. Litigation. Expensive.

Jan 30, 2016 - 10:23am

CRE nailed it. Finding money is the hardest part. Just as important, even once you do get that money, structuring a deal where YOU profit enough for the work you will do is just as tricky.

Making buildings isn't rocket science. But, once the work is in place, if you forgot to put something in (like some underground utilities), or something was done incorrectly, you can quickly lose your shirt if you don't have enough contingency built into your budget to rip up built work, install, and rebuild when mistakes are made. As you pursue this path, learn as much as you can about construction. Catching other people's mistakes will save you the most money in the long run.

This is also why the business can take a very long time to master.

Array

Jan 30, 2016 - 3:23pm

If I were you, this is how I would do it. Go to work at a development company. Learn to underwrite as an analyst. Get the fundamentals and technical skills down. Then get out in the field on the street and dabble in Acquisitions and get to know brokers. Buy stuff for your firm. Sell stuff. You make good money doing all this. Work for a while maybe to a director or partner level (10-15 years??) where you can get to that level where you are networking with people who are investing in funds at your company. Then after years of experience, you can walk up to investors with a gangster resume already behind you and say that you want them to invest in YOUR fund/deals. Having these years of resume behind you will help. Raising money is THE HARDEST PART in all this. If it were easy, don't you think every single person that works for a developer already would have their own fund? I would also suggest teaming up with a good developer/construction guy that can implement that process. Maybe one of you work on funding/acquisitions and another one on the development. Knowing how a condo development goes up is obviously KEY if thats what you want to build. SPECIALIZE. I would suggest build what you know. Don't go build a theme park if you have never done so. Finally....I think they KEY to success in all this aside from funding, is knowing how to LEASE up your space. Keep your tenants happy. Being good at leasing up space will save your ass in some shape or form.

Feb 2, 2016 - 1:43am

Here's a path that you might consider... Look at some projects that were recently completed. Back into the zoning analysis that the developer did to arrive at that building configuration. Talk to the city, architect, and the developer to understand what made the land a good development project. Do this for a couple projects so you start to see what works. Then you can start tracking down sites yourself and showing them to developers. Might take to a while to find one that works but you'll start to know people in the development community and learn from their feedback. When you find a deal that works you might even see if the developer will let you leave your commission in the deal as equity.

Feb 2, 2016 - 1:57pm
cRimeZ909:

Here's a path that you might consider... Look at some projects that were recently completed. Back into the zoning analysis that the developer did to arrive at that building configuration. Talk to the city, architect, and the developer to understand what made the land a good development project. Do this for a couple projects so you start to see what works. Then you can start tracking down sites yourself and showing them to developers. Might take to a while to find one that works but you'll start to know people in the development community and learn from their feedback. When you find a deal that works you might even see if the developer will let you leave your commission in the deal as equity.

This could be a decent gig to get your foot in the door with a development company. Ultimately though, being able to do a zoning analysis and site selection has very little to do with being an actual developer. Small tip of the iceberg. Most developers have real estate brokers who find deals for them; and lets be honest I dont want any of my real estate brokers developing a building for me. You learn by doing. Spend time under a good development firm learning everything and the rest will follow.

Feb 2, 2016 - 1:58pm

Real Estate Development Career. (Originally Posted: 02/22/2016)

Hello, all.

I am a junior at a non-target undergrad (It's a long story) with an passion for real estate, particularly in New York City. I do not have a major at this time. I do not have a "good" GPA at the moment.

How would I go about landing a job as an analyst at a place like Extell (or any of the other numerous real estate development companies)?

Would I need to go get an MBA beforehand?

I eventually want to start my own real estate development company, and working at a place like that would give me much-needed experience.

Thank you for any help.

Feb 2, 2016 - 1:59pm

I think getting internships are key to getting on board full time. I'd almost argue a mid size/smaller shop might be better for you so you are exposed to more roles, if doing your own thing is really your end game. Experience goes a long way in interviews. If your end goal is to do your own thing, then experience across the board is more important than ever. You'll need the financial experience to dial in numbers and be a great spreadsheet monkey, you'll need the acquisition experience so will need a good network of brokers in the game from being out on the street, then there's the technical knowledge of being creative with building something and understanding the development process in detail. After all that you then need the leasing game drilled down so you can stabilize your assets. So yeah, experience in any of these roles will help you for your end game overall

Feb 2, 2016 - 2:00pm

Thanks for the response!

A few questions:

  1. Do you have any examples of any mid-size/smaller shops I should look at?
  2. How would I go about getting an internship? Cold calling?
  3. I know acquiring the capital at a rate that will make the venture profitable for my company is paramount in the business and is the hardest part. How would I best go about learning that trick of the trade?

Thanks.

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