Real estate development offers an enticing and fulfilling career path, but it requires the commitment to acquiring the necessary education and training. If you’re passionate about transforming vacant land into thriving office towers or luxury apartments, read on to discover what it takes to become a successful real estate developer.
What Defines a Real Estate Developer?
A real estate developer is an individual or company responsible for overseeing the construction or renovation of residential homes, commercial offices, retail centers, or industrial sites. Their expertise lies in recognizing the potential of a particular piece of land or property and then mobilizing the resources needed to turn that vision into reality. Their responsibilities include finding investors to purchase the property, determining the best use for the land, selecting contractors, and managing the construction process. Additionally, they predict the financial returns that the new homes or businesses will generate and ultimately oversee the sale of the completed project.
The Requirements for a Lucrative Career in Real Estate Development
While it is possible to embark on a real estate career immediately, it typically takes several years of work experience to acquire the broad knowledge base necessary for success as a developer. Many professionals in this field have pursued undergraduate or master’s degrees in real estate finance or even obtained an MBA. Additionally, real estate organizations such as the CCIM Institute, NAIOP, or the Society of Industrial and Office Realtors offer certifications and continuing education opportunities that delve deeply into the intricacies of real estate development. According to David Wilson, the former president of the CCIM Institute, their educational programs provide unparalleled insights into crucial concepts such as cap rate, internal rate of return, and depreciation.
To embark on a career in real estate development, follow this step-by-step guide:
Step 1: Lay a Solid Educational Foundation
Numerous universities offer undergraduate and master’s programs in real estate within their business schools. These programs equip aspiring developers with a comprehensive understanding of real estate law, finance, environmental remediation, public policy, urban planning, architecture, and other relevant areas of study. Students may also gain practical experience through project-based coursework and internships, enabling them to build a valuable network of industry contacts. As Wilson suggests, interning with a reputable development firm can be an invaluable way to gain hands-on experience and guidance.
Step 2: Gain Practical Experience in the Field
After graduation, aspiring developers typically embark on one of two paths to gain practical experience:
Work for a Real Estate Development Company: Graduates from top real estate programs often secure entry-level positions as junior development associates in established real estate firms. These roles involve diverse tasks such as client communication, budget development, vendor management, project scheduling, market research, and assisting senior team members. Finding a mentor within the industry can significantly accelerate professional growth and offer valuable insights into the dos and don’ts of real estate development.
Work in Related Fields: Some aspiring developers choose to gain experience in related areas, such as real estate brokerage, building construction, finance, architecture, or commercial lending. Regardless of the chosen path, working for a larger company offers the advantage of exposure to a wider range of experiences and expertise.
Step 3: Pursue Additional Certifications and Courses
Many current and aspiring real estate developers opt for specialized education and certifications to enhance their career prospects. Various trade organizations offer certificates and courses specifically tailored to real estate development:
Certificates: The CCIM Institute provides the certified commercial investment member (CCIM) designation, as well as a comprehensive Development Specialty Track. NAIOP, the Commercial Real Estate Development Association, offers advanced certificates in commercial real estate development and real estate finance.
Courses: The CCIM Institute offers a range of courses, including an intensive crash course introduction to real estate development, a development workshop, a comprehensive Development Specialty Track program, and a formal designation in commercial real estate. Earning the CCIM designation requires completing courses in financial modeling, investments, market analysis, ethics, and passing a rigorous comprehensive exam. NAIOP offers both online and in-person classes, including certificate programs dedicated to commercial real estate development and real estate finance.
Getting Started as a Real Estate Developer
When starting out in real estate development, it is essential to set realistic expectations. The notion of graduating from college and immediately earning six figures as a developer is far from reality. Success in this industry demands a strong and unwavering work ethic. As Wilson explains, real estate development is not a typical 9-to-5 job. Therefore, those entering the field must be prepared to invest significant time and effort into their careers.
Here are some invaluable tips for new real estate developers:
Build Relationships: Networking and relationship-building are paramount in this field. Cultivating strong connections with industry professionals is crucial. Building trust and establishing a reputation for delivering on promises will pave the way for future business opportunities.
Secure Capital: While developers often invest their own money, the majority of financing comes from commercial loans and investment partners. Finding trustworthy partners and securing financial backing is crucial. Familiarize yourself with commercial real estate loans and their qualifying terms.
Continuous Learning: Real estate developers must remain updated on market trends and demands. Regularly expand your knowledge base and remain adaptable to changing circumstances. Remember, each deal is unique, and learning from experienced professionals can make a significant difference.
Acquire Land: Once you have access to capital, acquiring suitable properties becomes a top priority. Consider purchasing vacant land or older buildings for rehabilitation or redevelopment.
Develop a Plan and Obtain Approvals: Thoroughly analyze the market to identify unmet needs and design projects that address those demands. Seek approval from local government authorities before commencing construction.
Build: Once the necessary approvals are obtained, construction can commence. Effectively manage the construction process to ensure timely completion and adherence to quality standards.
Sell the Project: After completing the project, focus on selling it to interested buyers or tenants. Although obtaining a real estate license may seem tempting, it is often more beneficial to concentrate on new development deals rather than splitting attention between different roles.
How to Become a Real Estate Investor with Limited Funds
While real estate developers typically invest some of their own money, the majority of financing originates from commercial loans and investments from third-party stakeholders. Private real estate investment trusts (REITs), pension funds, private equity firms, family offices, and individual investors often provide the necessary capital for projects. Initially, you may look to private lenders and “angel” investors, including friends and family members seeking retirement income diversification. Attracting private investors may also be possible by highlighting the social value of a project, such as affordable housing development.
The Average Salary of a Real Estate Developer
Real estate development offers the potential for high earnings; however, salaries vary depending on the level of experience and specific job roles. The table below presents the annual median salaries for retail development and construction positions, sourced from the most recent real estate compensation survey conducted by CEL & Associates, a notable real estate consulting company.
How the Pandemic Has Altered Real Estate Development
The COVID-19 pandemic profoundly affected the real estate development sector. While the situation is gradually stabilizing, establishing personal connections and fostering relationships has become more challenging as the reliance on virtual channels increases. As Wilson suggests, professionals in this field must leverage their networking skills to create meaningful connections and adapt to the new normal.