Becoming a successful real estate developer isn’t easy, but the hard work pays off in the long run. Just look at Robert Johnson, the first African-American billionaire, for inspiration. He came from humble, working-class beginnings and now owns one of the largest hotel REITs in the country. Ultimately, becoming successful in this industry requires a sharp mind, business smarts, and the ability to synthesize and analyze data into a lucrative investment decision.
Get educated
You need to be educated to become a successful developer. Degrees in finance, construction management, law, or urban development are good choices, but not the only ones. Edgardo Defortuna founded his property development company, Fortune International Group, after graduating with a degree in electrical and mechanical engineering. His company specializes in luxury projects and has a revenue of $1billion annually. However, real estate development doesn’t necessarily require a degree — get a job in the real estate business or a realtor’s license to learn about the industry.
Build a team
Every property developer needs a reliable team to work with on projects. You’ll need to make connections with numerous experts, such as, accountants, architects, attorneys, contractors, geologists, and engineers. If your friends, family, or coworkers have had recent home renovations, ask if they have any recommendations. You can assemble a great team through word of mouth alone. It’s worth asking your architect to recommend a reliable builder. Above all, you should choose experienced and reputable professionals. The relationships you forge with your team are important. Treating each and every member with respect will benefit you in the long run, especially when you need to ask someone for a favor short notice.
Choosing your first property
Cost plays a major role in choosing your first property. Work out a realistic budget — do you need to take out a mortgage or can you pay in cash? If you need to take out a mortgage, spend time researching different lenders to find the best deal. Usually, a mortgage is a more affordable option. You put down a smaller downpayment and, if your property increases in value, someone else will eventually finance the rest. If you’re concerned about the cost, remember it’s possible to get started in real estate development without having hundreds of thousands in the bank. For example, Sidney Toress first ventured into property development while he was making roughly $22,000 a year in construction. With a $40,000 line of credit, he bought, developed, and sold his first property for $100,000 profit. He’s now developed over $100 million in real estate. And since this is your first project, make sure to purchase a cheaper property that needs little to no work to keep things low-risk.
As a beginning property developer, it’s likely you’ll find it easier to break into residential real estate. However, you should seriously consider starting off in commercial real estate (or at least switching to this sector later down the line). Commercial real estate typically has less governmental regulation and offers greater return on investment, which means you’ll be making bigger profits earlier on in your career.
Photo by David McBee from Pexels
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