What's the best way to break into RE development?

Question

What's the best way to break into RE development? I'm looking to develop some multifamily properties and hold onto them for the long term.

What's the best way to get started?

I've been mailing land in my area consistently, but not getting a lot of traction. It seems people are paying high prices in expectation that soon prices will have appreciated enough to justify construction.

I cannot consider working for a dev firm as I'm already a full time investor and cannot take a bunch of time away from my biz.

Any other suggestions?

Bryan Hancock · Answer

What J said.

Learning development is a pretty tall order and any wrong step can blow off limbs.  People would really need to know more about your personal situation for what value you can add as well.

I get requests like this about 100 times a year.  There are people that want to learn development, syndication, etc.  We have developed a pretty good system to see whether or not these people add sufficient value and are serious enough to be worth working with.  Of the 100 or so that approached us last year I can think of 2 in total that have:

1.  Stuck with it

2.  Made themselves valuable and were worth coaching

Ironically both of these people came from BP.  After a year of coaching they still don't have all the tools needed to do development on their own, but they have some of the key ingredients nailed.  Learning to raise and organize money and having the right vendors to execute are major development activities that are far easier to learn by being an apprentice with someone locally than they are by doing it yourself.

Here are some of the major things you'll need:

-Money (Equity) or the ability to raise it as a sponsor

-Debt

-Proper deal flow with buy-side contracts structured to minimize entitlement risk

-Civil engineers familiar with the locale you'll be developing in

-Architects for vertical construction if you do this piece

-Financial modeling skills

-Quality builders with good reputations (this one is KEY) and properly structured contracts with them

-Quality brokers to exit the projects with input into what will sell

This really translates to:

-Capital and access to capital

-A track record to secure loans

-The ability to execute with professional resources

-The ability to source, underwrite, and exit projects

There are hundreds of other details as well, but those are the major things you need.  Find some ways you can add value in the key value centers above and you can partner in some capacity with local developers willing to take you under their wing in trade for said value.

J Scott · Answer

Find someone in your area who is experienced with development and new construction and offer to help them out in exchange for mentorship.

Bryan Hancock · Answer

Generally via email Josh.  I am sure I am like most developers and don't really answer calls from people I don't know.  I'd spend all day long on the phone.

Most people will respond positively to well-written emails presenting what they're seeking and how they propose to add value.  Almost all developers are time-strapped and are seeking capital.  Developers are almost universally asset rich and cash poor.

Offer to do the crap work they don't want to do.  Figure out how to add value.  Try with several folks because there is plenty of ego to go around in the industry too and you are likely to have a lot of people say no before you get to a yes.

Jason Hsiao · Answer

Found it via Loopnet. Previous developer was cleaning up their portfolio and getting impatient with the re-zoning process with the city and was looking to unload.

Yeah, finding deal is hard and takes a lot of patience especially in today's market IMO. I've started using direct mailing campaigns for some smaller projects that I'm looking for.

Jason Hsiao · Answer

@Josh Justiniano I had the deal/property in hand already and it's technically a profit sharing instead of JV or equity in my company just because neither of us wanted to create a separate entity just for this deal. I wouldn't exactly advise that for everyone; we both have a pretty good and comfortable working relationship by the time we agreed to this.

Sean Kremer · Answer

Developing raw land is best left to experienced dudes with deep pockets in my opinion. Depending on the situation, you should have millions available to you before you start, also keep an eye on  timeframes that drag on, govt. red tape, small minded politicians, as accruing interest can slowly kill you and if you're not prepared for lots of hurdles developing land  will take you down if not planned for.

Another thing that many developers overlook is the ability to get people onto your way of thinking fast, along with being a good people person, because you may need to guide someone do something for you that they may not be keen to doing, and you absolutely cannot be someone who burns bridges. Having enemies in high places will kill you fast.

So you need to start with millions in reserve and make sure that no one has a bad thing to say about you........easy as pie huh????

There is a lot of money to be made if things go well, but you may need some sleeping pills to get you through the night when things go sideways and millions of dollars are on the line......Developing land is not for weak minded amateurs for sure,  and there are lots of safer, easier ways to make money.  That's why I say it is suited better for senior investors or that special person that has the skills to manage everything, and are used to dealing with numbers that have a LOT of zero's behind them. :)

Bryan Hancock · Answer

Capital, access to capital, and their time.  If you can really underwrite projects well that would be valuable too, but if you lack experience with development this is unlikely to be the case.

Rob Harris · Answer

Was going to take a stab at trying to address some of your questions. But the more I thought about it the more variables came into play that would make this a 10 page paper!

Would need a lot more specifics re a lot more variables.....

Development is not cookie cutter, especially from jurisdiction to municipality,,, let alone state to state. That's from lending to environmental requirements, to required processes, to fees (which can kill a deal from mere inception)....

Josh Justiniano · Answer

@Bryan Hancock - What do you think about this email here? Would that grab your attention?

Thanks for the input everyone! Really helpful.

To whom it may concern,

I’m an aspiring RE developer with experience in residential flips, rentals and multifamily holds. As someone who is looking to learn more about the development process, I’m offering up some of my time to help complete various development related tasks.

I’m able to offer you or your firm the following:

• I have access to capital for projects from myself and other friends and family members so long as the project makes financial sense.
• I have some basic underwriting skills - Have completed CCIM financial modeling courses and REFM financial modeling courses.
• I am able to donate some of my time to complete tasks for you or your firm so long as they are related to the development process.

I am not new to real estate. I have been a full time investor for the last 3 years and have completed over 70 transactions in that time, so I am able to add substantial value so long as it’s mutually beneficial for all parties involved.

I am not asking for an hourly wage or salary; I am simply looking to add value to learn.

If you’d like to speak more in depth, I am available anytime via cell phone, email or text message.

My cell number is {My Cell Number}.

Looking forward to hearing from you.

Sincerely,

Joshua Justiniano

{My Mailing Address}

{My Cell Number}

What's the best way to break into RE development?

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