10 Steps to Becoming a Successful Real Estate Developer

1. Have enough money



This one I personally really messed up on. I wasn’t prepared for the length of time that it would take to complete the development. I barely could scrap enough money together to close the property and I didn’t have enough to pay the architect, engineering, development fees, and all the other costs that come with the development, in addition to my living costs. I had to pull in more money investors and that is costly as you will need to offer them a higher interest rate. It has been extremely stressful as I’m not used to having to robbing Peter to pay Paul. I have learned my lesson on this one.



2. Buy Right



You really make your money when you purchase the property. As good as you are about calculating the costs of the project, there will be surprises. You may have to pay more impact fees or bring buildings up to ADA compliance. You will not be able to foresee every expense that will occur. Nor will you be able to control exactly when the project will be completed. You will also not be able to foresee the changes to the real estate market. If you don’t have enough margin between what you bought the property for and the cost to develop it to still make a large profit, you will not be a happy camper. You don’t want to put all of this time and money into a project and two years later just break even or worse lose money.



3. Start small to get experience.



You will make mistakes on every single property. You will hopefully learn from those mistakes But when you are just beginning make the big mistakes on the smaller developments. Once you have one or two developments under your belt then move up. The developments that you do will not be identical. The process will be. When you start with a smaller development, you will be able to learn how to handle things that will come up. After a couple of these projects are completed, a larger property won’t be so intimidating. Remember, we all learn how to crawl before we learn how to walk. However, don’t wait too long to move up to larger projects either.



4. Work with the city not against it.



When I decided to do the condo conversion project I was asked “Have you every worked with the city before?”. When I answered “No”, then their response that followed was generally, “There’s no way the city will allow you to do that”. For some reason, the City of Redding had a horrible reputation for being difficult to work with. I decided to not form an opinion until I personally saw for myself if this was the case. I decided that if they are difficult that I could go in there with a extremely nice attitude. If it was true that they were difficult then I would hopefully “kill them with kindness”. I never had the experience of finding the city difficult to work with. I thought that my planner, Kent, went above and beyond his duties and I honestly had a good experience.



Don’t go into the city with an attitude. The way you treat these people will have a vast implication on how quickly your project goes through the system, the cost, and if it will even get approved. Do not piss these people off! You will be spending a lot of time with them and they can be your best friend or kill your project. It’s up to you. Life is too short anyways. It’s just better to treat people generously.



5. Get people who are local and knowledgable.



Every local government works differently. You don’t have to have the experience in that area, but you must find people who do. Try to find a surveyor who knows what the city likes to see on the tentative map. Find an architect who knows the type of styles of buildings that the city likes to see. The city may not know you as a developer, but when they see familiar names on the paperwork in the application, it is very helpful.



I found this very helpful in my condo conversion. I hired a lady named Karen as the landscape architect. She had just retired after working for the City of Redding for many years. To say that having her on our team was an advantage would be an understatement.



6. Know the laws (local and state)



Once again every city has their own local statues that may be stricter or more lenient than you are used to. Additionally the state may have laws that must be complied with that are different than other states.



For instance, California is known for having extra laws and regulations that must be complied with. From a developers point of view if you are used to developing in California you would probably find developing in other states a piece of cake. Once again, you personally don’t have to know the laws, just have people on your team that do. Knowing laws though can be helpful as ammunition if you need it.



For instance the State of California implemented the SB 1818 which is the Density Bonus Act. It basically mandates that local cities give concessions or density bonuses for the developers allocated a certain percentage of the development toward affordable housing. This is a newer law and if you as a developer know about it and you need a concession or waiver, this may be helpful. Nobody is going to search out this information but yourself.



7. Treat people with respect



You will realize that you will be managing a lot of people all at once. Sometimes people act like they are back in high school. Your architect may piss off your contractor and you will have to find a way to get issues resolved. The best way is to treat people with respect. Barking out orders may make you feel good, but I can guarantee that those people won’t respect you. I want to be able to foster relationships as I want long term relationships to build. There are tactful ways to handle almost any situation. I am not advocating being a wuss. You are in charge. But show people respect, and you will receive it.



8. Be efficient



Time is money. If you are a procrastinator you will lose money every day that the development is not completed. You must be able to manage a large number of items, handled by many different people. If this is not something that you would find yourself able to handle, that’s okay. Just make sure that you have the money in your budget to hire a project manager who can attend to the details that need to be met.



9. Be honest



If you promised the city that you will do something, you better do it. Did you promise the buyers something not in the stand package? If you said you would do something you better do it. While cutting corners may save money on this development, don’t think they will every trust you again. It’s just bad business. If some expectation can’t be met, let them know and ask for suggestion on how they would like you to remedy it. That way they will know that you are making the effort to live by your word. Nothing is more valuable. Nobody wants to work with a liar.



10. Be decisive



Nothing drives me more nutty than wishy washy people. Once the facts are there, make a decision already. These kinds of projects are not for the type of people who have trouble making quick decisions. Thousands of decisions will need to be. How big will the lots be, what colors to paint the exteriors, the development’s name, the price. I could go on and on. You will be the leader. Leaders make decisions.





There is just so much involved in real estate development. But what I really believe is that the success of a project is not so much the development itself, rather the ability of the developer. It really is something that takes a person who can handle mental stress, juggle multiple tasks, and make quick decisions.