Frustrated Watching Developers Do Ideas I Couldn't Afford

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Frustrated Watching Developers Do Ideas I Couldn't Afford

Landon Elscott
Investor · Newton, IA · Member since 2012 · 89 posts · 39 votes

Currently, I'm 26 years old, own my own home and also have a SFH my wife and I have been renting out since we bought it last year.

I can appreciate having patience, but latelyvIve been very frustrated about having ideas and watching others develop them because of a lack of cash.  I tend to have grand visions, and I suppose my time will come someday, but I just get so impatient when I see big developers come in and do something I had thought would be a good investment a couple years prior.

For instance, there is an old warehouse the city has been trying to sell for quite some time and theyve been trying to promote it as a business headquarters like it used to be...however I thought over the past couple years it would be better as apartments and lofts with ammenities that appeal to younger professionals.  I just learned today that a development firm is coming in with $7M and receiving huge tax incentives to develop into urban lofts...but instead they'll be subsidized for section 8.  That's not what I had in mind, and i fear it will further negatively impact our city.

I know I could never have $7M, but God I hate watching this company come and profit from an idea I've been thinking of for years...only to do it in a way that hurts the community demographic wise.

So, what is a young and ambitious person to do?  Do I wait it out and grow my wealth slowly until I can afford to do my own revitalization projects or are there avenues in central Iowa for investors like me to find people who can see my ideas through as a partnership and also provide me some equity despite my lack of money?

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Bryan Hancock
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
11y

@Jon Klaus 

People often want to try to climb too many rungs on the ladder at once.  The way that successful developers get started is to start small, skin their knee on easier deals, and move up the food chain.  There are plenty of people out there that come out of business school with knowledge of spreadsheets and academic models and have zero clue about what it takes to do deals in the real world.  

One of the main things successful developers need to be able to do is to raise money.  Most of the elephant chasers think that this is easy and that they just need to find one big capital partner to make it happen.  What they fail to realize is that the big capital partners don't need them and they are trying to avoid newbies.  You have to hustle to find money and to learn the development code.  From there you can do bigger deals and move up the food chain.

Another major constraint is getting banks to lend to you.  Asking a bank to lend on a project where you're the guarantor and the size of the loan is many times the size of your balance sheet is likely an exercise in futility.  Capital simply won't be attracted to you in these cases because it is too risky.  The investors - be they online crowdfunding investors, lenders, private lenders, or whatever - aren't going to risk their hard-earned capital on you when there are better risk-adjust opportunities elsewhere.  

Hold your head up before you crawl.  Crawl before you walk.  Walk before you run.  Run before you sprint.  These are simply concepts, but most people aren't willing to do the work to make them happen.  I know this first-hand.  When I first joined BP I ran a legitimate coaching company called The Entrepreneur's Incubator.  I only took dough on the back end of deals for people that were serious about investing.  You know what I found?  Surprise!  I found that 95% of the people that claimed they wanted to learn to invest really wanted the cash to wash all over them and to complain about how hard it was.  We promptly shut the company down and I started a business with my best student @John Blackman .  John and I have already done millions of dollars of deals together and will probably exit 30 or more projects next year.  

So get off your a$$ and go make it happen.  Start small, build a demonstrable track record, and THEN grow to the next level.  Earn the trust and respect of your investors and lenders.  Rome wasn't built in a day.  

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  • Andy Robison
    Investor · Kansas City, MO · Member since 2013 · 465 posts · 170 votes
    11y

    There is some information on how to put together large deals brining in multiple people to find you upfront cash for a % of the deal.

    0Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    11y
    Originally posted by @Landon Elscott:

    I know I could never have $7M, 

    First thing you need to do is change your thinking. If you think you're not worthy, if you think you'll never have 7M, if you think you can't be successful, guess what? You're right!

    If you KNOW you'll be successful, if you KNOW you can raise 7M, if you KNOW these things, you will make them happen. You need to read up on the law of attraction and invest in your education by reading everything you can get your hands on to change your mindset. You seem like a smart and ambitious guy and the only thing standing in your way is YOU! :)

    “Whether you think you can, or you think you can't--you're right.”
    ? Henry Ford

    2Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    11y

    Sorry, double posted.

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    11y

    @Landon Elscott  Most people when they drive  by, or live by a property that is vacant imagine what would go there. If you live in a neighborhood you know the area, and know what it lacks, and imagine developing it there. Imagining is the easy part. 

    The next stage, is finding out if the land is zoned correctly for your vision, and if there is a market for your imagined project. Still pretty easy. Now the hard part, designing that vision, finding people with money that share the vision, and not only the vision, but your ability to bring all of the pieces together to develop it. 

    In order to do that, you need some type of experience and track record. The best advice I can give you is to start on a smaller project, and learn the ropes. Start building your development foundation. 

    All of us can't be Donald Bren , but even he started small and built up! 

    2Reply
  • Roger Doe
    Property Manager · New York City, NY · Member since 2013 · 34 posts · 10 votes
    11y

    I'll be honest, I feel the same way as you do and I've grown to a small but decent size.  I'm assuming you'll always feel this way.  There will always be someone who's doing something bigger and you'll feel jealous.  But, that's what motivates us, no?

    Here is some advice:

    1. Always keep learning and growing.  Besides capital, the biggest constraint in our business is knowledge.  You can learn a lot in ten years.  Just keep plugging away slowly.  Don't burn out.

    2. Be careful of the asset that you invest in.  I've had the privilege of seeing my father's peers over 30 years and how their investments panned out.  There is a huge range of values.  One had bought a lot in a busy but low income area that 30 years later did not appreciate much relatively.  He was always hoping that one big investor would come along and it never did.  Another had purchased in a vacant area that turned and he literally made tens of millions once developers developed the entire town.  Another had invested in fast food spot and hasn't changed much since the location is bleh.  

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y

    Some good thoughts above.

    Also looking at the other side of the coin, you should feel validated that your ideas are being proved out in front of your eyes.  

    Most "did it themselves" developers get it cranked up in the second half of their careers for a few reasons.  

    First, it takes time to get the experience and live through a few cycles, to understand how it works in both boom and bust markets.  You need to know how to operate in both to be successful long-term. Plus there is a huge body of knowledge required to develop bigger projects.

    Second, it takes time to amass enough of their own capital to able to have skin in the game in their projects.  Are you banking as much as you are able, now?  Or at least building your balance sheet?  This really matters to your future debt and equity partners.

    Third, it takes time to build a track record to attract the banks and investors to you. Start small and work up in a logical progression.  A resume, a portfolio of deals.  The first few can be single family rehabs or spec builds.

    I'm not saying it can't be done fast, but a lot of pieces have to fall together just right to do bigger development deals in the early part of a career.  A pile of cash isn't enough. 

    I'm enjoying watching @Account Closed and @Bryan Hancock do it,  Any input guys?

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    11y

    @Jon Klaus 

    People often want to try to climb too many rungs on the ladder at once.  The way that successful developers get started is to start small, skin their knee on easier deals, and move up the food chain.  There are plenty of people out there that come out of business school with knowledge of spreadsheets and academic models and have zero clue about what it takes to do deals in the real world.  

    One of the main things successful developers need to be able to do is to raise money.  Most of the elephant chasers think that this is easy and that they just need to find one big capital partner to make it happen.  What they fail to realize is that the big capital partners don't need them and they are trying to avoid newbies.  You have to hustle to find money and to learn the development code.  From there you can do bigger deals and move up the food chain.

    Another major constraint is getting banks to lend to you.  Asking a bank to lend on a project where you're the guarantor and the size of the loan is many times the size of your balance sheet is likely an exercise in futility.  Capital simply won't be attracted to you in these cases because it is too risky.  The investors - be they online crowdfunding investors, lenders, private lenders, or whatever - aren't going to risk their hard-earned capital on you when there are better risk-adjust opportunities elsewhere.  

    Hold your head up before you crawl.  Crawl before you walk.  Walk before you run.  Run before you sprint.  These are simply concepts, but most people aren't willing to do the work to make them happen.  I know this first-hand.  When I first joined BP I ran a legitimate coaching company called The Entrepreneur's Incubator.  I only took dough on the back end of deals for people that were serious about investing.  You know what I found?  Surprise!  I found that 95% of the people that claimed they wanted to learn to invest really wanted the cash to wash all over them and to complain about how hard it was.  We promptly shut the company down and I started a business with my best student @John Blackman .  John and I have already done millions of dollars of deals together and will probably exit 30 or more projects next year.  

    So get off your a$$ and go make it happen.  Start small, build a demonstrable track record, and THEN grow to the next level.  Earn the trust and respect of your investors and lenders.  Rome wasn't built in a day.  

    6Reply
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