One of the best ways to get rich is through making money in real estate. However, what career path to choose? Working as a real estate developer is considered as one of the most challenging careers in the real estate business, yet one of the most rewarding ones as civil contractor.

A successful career in real estate development will be the focus of this article. We will discuss what real estate development is and how you can excel in the industry in the same way that entrepreneur Lincoln Frost has. Let’s get to it.

• What is Real Estate Development And Who is a Real Estate Developer
• What Does a Real Estate Developer do
• What will the development team consist of?
• How to Become a Real Estate Developer
• Do You Need a Real Estate License to be a Developer?
• How Much Does a Real Estate Developer Make
• What is the difference between a real estate developer and a real estate investor?
• How Do Property Developers Make Money?
• Billionaires Use Real Estate to Build Net Worth
• Two Things That Make You Money In Property Development
• The key pitfalls to property development

What is Real Estate Development And Who is a Real Estate Developer

Real estate development, or property development, is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of developed land or parcels to others.

Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real property. Real estate development is different from construction, although many developers also manage the construction process.

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Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control, and orchestrate the process of development from the beginning to end. Developers usually take the greatest risk in the creation or renovation of real estate—and receive the greatest rewards.

Typically, developers purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approval and financing, build the structures, and rent out, manage, and ultimately sell it.

Sometimes property developers will only undertake part of the process. For example, some developers source a property and get the plans and permits approved before selling the property with the plans and permits to a builder at a premium price.

Alternatively, a developer that is also a builder may purchase a property with the plans and permits in place so that they do not have the risk of failing to obtain planning approval and can start construction on the development immediately.

Developers work with many different counterparts along each step of this process, including architects, city planners, engineers, surveyors, inspectors, contractors, lawyers, leasing agents, etc. 

What Does a Real Estate Developer do

Since the real estate industry is quite large and still expanding it is not possible to manage the things without a professional. There are people like the marketer and the broker involved in the field. Similarly, the real estate developer has the responsibility to develop newer possibilities in the real estate industry. The role of the real estate developer includes the following:

• Make the feasibility studies about the real estate properties, their requirement, and customer growth.
• Putting the strategies to grow the part in each of the areas.
• He will be the person to overlook the project until it is completed.
• The real estate developers will also supervise the contractors and resolve the problems with minimum expenditures.

What will the development team consist of?

The real estate developer will have the development which he is supposed to manage in order to develop the real estate. The process of real estate development is not easy and therefore requires the right team of people. The basic requirement of the team will include:

• A consultant who can advise on the decisions to be taken and plan the development
• An architect to design the whole plan.
• Quantity surveyor to estimate the cost of development and minimize it.
• Project manager to manage the development project
• Contractors to build the proposed project.
• Accountant to manage and raise finances.
• Solicitor to manage the sale of the developed real estate
• The real estate developers to manage and head all these people and look if the development is carried out effectively.

Real estate development is done to earn profits from development activities. The developer may be acting as the replacement of some roles like site finder and agent to sell the planned development, however, his major work is for organizing the development within the whole process.

The developers are not the professionals with the knowledge of the tasks carried by the team but are known to the basics of their work. The part of real-estate developers goes with the planning, and organization of the overall development.

How to Become a Real Estate Developer

Real estate developers are entrepreneurs that identify prime real estate, develop the property, collect rent from lessees or sell developments for a profit. To become a successful real estate developer you need more than deep pockets.

You need to foster key relationships, have a deep understanding of the market and your own vision, and you also need to build a team whose connections will help you succeed. These are a few vital elements to get you thinking about being a mogul.

Learn the Basics

It’s not an absolute must that you earn a college degree, but at the very least you have to obtain basic knowledge about real estate transactions, construction, contractors and urban development.

Success is impossible without understanding the basics of this industry. If you don’t have the means or inclination to obtain a degree in finance or construction management, you need to find work in the real estate business so you are familiar with key elements of property development.

Some real estate licensing programs allow you to obtain a license within three to six months, and the knowledge you acquire in this type of program can give you a solid foundation.

Earn a Bachelor’s Degree

While earning a bachelor’s degree is an important step in becoming a real estate developer, this degree doesn’t have to be in a specific subject. Several majors include the courses that can help aspiring real estate developers build the skills necessary for the role.

Relevant subjects include civil engineering, business, and management. A degree in civil engineering can be valuable since it can help students learn how things are built.

Programs in business or management can help students develop logical reasoning skills, critical thinking, and analytical abilities, in addition to learning about modern management practices.

Understand Your Market

It takes years for developers to thoroughly understand their local market, which is why it’s important that you align yourself with an expert in local properties.

In other words, you need to find an experienced real estate agent and form a business alliance in which that person alerts you to prime commercial properties. This is also important in helping you to define the parameters of your market.

For example, will you focus primarily on developing business properties or will you focus on developing residential properties? There are huge differences in each of these development sectors in terms of investment and profit opportunities.

Set Small Goals to Start

Rome wasn’t built in a day and your real-estate development career isn’t about sprinting out of the gate and trying to develop the biggest property on the market. Set attainable goals such as acquiring one property for a cheap price, developing it and then selling it for a profit.

By going through the development process on a smaller scale, you will be able to better understand the challenges you will face such as permits, zoning, construction delays and contracting issues.

Handling these problems on a smaller level will give you the confidence to deal with issues on a much larger scale and provide you with invaluable on-the-job-training.

Build Your Team

Real estate development isn’t a solo endeavor, which means you have to build a team of experts that will compensate for your lack of experience.

Typically, you will need a builder with a good reputation, a designer, an engineer to help resolve structural problems, a lawyer, a finance guru, a zoning expert and someone who has a thorough understanding of zoning restrictions, licensing and permits.

These separate sets of skills are essential to helping you handle the myriad of issues that will arise when you’re building a big development.

Focus On Effective Communication

Learning how to communicate via different methods and with different people is key. Real estate development involves a lot of moving parts, which require many people.

Effectively communicating your expectations, goals, wants and needs with respect is vital to seeing the project through to completion.

The other half of communicating effectively is learning how to listen to others when they have worries and needs. It is important to always show others that you are open to hearing from those around you.

Consider a Master’s Degree

Master’s programs in real estate development can help students learn about the issues that real estate developers frequently face, including design, planning, land use, and environmental regulations.

Many of these programs incorporate numerous disciplines, such as city and regional planning, finance, architecture and construction science, public policy, law, sustainability, and management.

Students enrolled in a master’s program in real estate development can also expect to learn about negotiation, marketing, economics, urban history, and deal structuring in all capacities, including industrial, office, retail, commercial, and residential. Other applicable majors could include community development or urban planning.

Consider Certification

Although certification is voluntary, one can explore the Realtors Land Institute’s Accredited Land Consultant (ALC) credential. To qualify, individuals must submit several pieces of documentation.

Some of the requirements include an active real estate license, institute membership for at least six months, and a minimum of three years of real estate experience in areas like real estate sales, brokerage, or development.

Additionally, applicants must complete courses through Land University and pass an exam. The ALC designation is valid as long as institute membership is kept active.

Continue Education

Prospective developers who want to commit to learning the industry may want to consider a certificate or continuing education program. The Commercial Real Estate Development Association (NAIOP) has programs resulting in a Certificate of Advanced Study in Real Estate Development and a Certificate of Advanced Study in Real Estate Finance.

To achieve these certifications, one must take a required number of courses. These courses range from advanced development practices, real estate law and land use policy, advanced real estate finance, and financial analysis of development projects.

The NAIOP also offers continuing education programs that can help to support and facilitate learning opportunities. Individuals who choose to complete a continuing education program can choose from eight course selections, including advanced finance, site analysis, construction management, and commercial leasing.

Do You Need a Real Estate License to be a Developer?

Many aspects of the real estate development process require local or state licensing, such as acting as a real estate broker or sales agent. A real estate developer is not a professional designation; there are no schools or associations who recognize or protect the term as a trademark.

How Much Does a Real Estate Developer Make?

When the question comes to making money in real estate, a real estate career as a developer can make you rich. Still, how much does the real estate developer make?

There is no single answer to that. Nonetheless, the real estate developer makes much more than the other parties involved in the project creation. To emphasize, the biggest part of the profit goes into the developer’s pocket. Additionally, the profit a real estate developer makes may exceed $ 1,000,000.

Still, you should understand that there are many factors that influence the profit of the developer. One of the biggest factors is the type of the project, whether it is a shopping mall or a residential unit.

Another thing that influences the profit is the amount of money that the developer took from a bank in the form of a mortgage loan. Finally, you should know that it might take several years to complete a single project. Consequently, the developer will not see a penny of the profit until the building is sold.

What is the difference between a real estate developer and a real estate investor?

A real estate developer is, generally, someone who develops new real estate properties from the ground up with the intent of selling these properties for a profit.

In order to start a career as a real estate developer, you will need to have sufficient knowledge in the field and the financial means used to generate large funds. If successful, a career as a real estate developer will provide you with a hefty amount of income but at the cost of a higher risk associated with failure.

As for a real estate investor, this is someone who invests a certain amount of money in buying an investment property with the purpose of either renting it out, or for the purpose of selling it out after renovating it or upgrading it. This investment property can be a large single family home, a single room apartment, or even a small hut in the woods.

Level of Education And Experience Required

When it comes to the level of education or experience required, you should know that a career choice as a real estate developer will require a high level of education, an associated degree, and around 5 years of experience.

In addition, becoming a real estate developer requires extensive knowledge of the real estate market. In order to start a career as a real estate developer, you will need to have sufficient knowledge in several different fields, including the fields of law, business administration, construction management, civil engineering, urban development, and the different processes required in order to develop new real estate properties from the ground up.

Additionally, you will need a minimum or a bachelor’s degree in a related field, and preferably a master’s degree as well as some professional and practical experience in the field in the form of internships and actual work experience with real estate development firms.

As for a real estate investor, all of those requirements can be bypassed. Not because a real estate investor does not require an extensive amount of knowledge, but because this knowledge can be self-learned. Moreover, the risk associated with real estate investing mistakes is far less than that associated with real estate development.

Expect Income

As a real estate developer, you can expect large amounts of return on your investment, but at a higher risk. The amount invested in developing a new real estate property is far greater than the amount needed to invest in an already existent one.

This is due to the costs of construction from the ground up, in addition to other legal fees, contractors, etc. However, once your real estate property is sold, the return on investment is usually very high.

As for a real estate investor, the amount of money that you make will always depend on your investment choices and preferences. Not that you can’t make large sums of money from a career as a real estate investor, it’s just that you will have the option to make smaller amounts of income at a lower risk, in addition to being able to start an investment with a smaller amount of money than the amount associated with real estate development.

Management and Time Requirements

A career as a real estate developer will require you to work full time. You will always need to be ahead of your investment, planning your next move, and making sure you finish developing your real estate property as fast as you can at the lowest cost in order to generate the largest amount of income.

You will also need to invest a lot of time into building relationships and learning new things about the real estate market that you’re competing in.

As for a real estate investor, this could be done as a part-time job. You get to decide on the amount of time that you’re willing to put in your investment, and whether you’re going to manage your investment property personally or by hiring a professional property management company.

You will need to be more personal and more social, and you will need to be up to date on all the ongoing real estate trends and factors affecting the local housing market. The more time you’re willing to invest in your rental property, the more rental income that you can expect it would generate.

A career as a real estate developer will more often than not mean that you will need to become a professional money-making machine that is always thriving to expand its knowledge and experience through higher education, degrees, internships, and every other means available in order to build a golden empire.

You will need the drive to go big or go home. This is the nature of this career choice due to the high-risk, high-reward nature of it. And although real estate development investments are considered more short term, they will require more time invested and more years of preparation before you can be as successful as you would like to be.

As for a career as a real estate investor, you will have more freedom to decide on the amount of time, effort, and money that you’re willing to invest in your rental property, which will proportionally decide on the amount of risk associated with your investment.

How Do Property Developers Make Money?

In short, residential property developers make their money by maximising the true value of the land they are working with.

They do this by building separate dwellings and subdividing them, so they can be sold as individual dwellings. They understand the local laws and regulations inside and out and can maximise their designs and builds accordingly.

A successful property developer won’t try to fit a square peg into a round hole and develop something that has too many unknown variables. It’s a step by step process that if followed correctly, will result in a tidy profit.

Time is Money

One thing that property developers understand is that, even if there’s a profit at the end of the process. Every day in the project has a dollar amount attached to it. Time is money after all.

Efficiency is the key. Knowing when things need to be done and making sure nothing is missed saves both time and money. As a result, smart developers leverage highly refined systems and development processes to ensure efficiency and value for money.

Days can quickly turn into weeks, weeks into months and months into years. Which can blow out a project and promptly make it unviable.

There’s a reason you see abandoned developments in most major cities and towns. As well as being aware of the impact time can have on costs, a developer has a clear understanding of how long things should take and exactly how much they should cost.

They also know the timelines that all the steps should occur in. This way, they can keep a tight grip on the reins and stop costs from ballooning and projects timelines from blowing out. A successful developer is a project manager, first and foremost.

They Have a Solid Network

Professional property developers have a rock-solid network of partners, contractors, suppliers and other associated and relevant professionals in the property and construction sectors.

They can offer these people continuous work. As there’s always a project on the go, so they get preferential treatment and cheaper than wholesale rates.

This keeps costs down and keeps the ship sailing smoothly, resulting in quicker builds and turnaround times, therefore, keeping the business and individual projects viable.

Billionaires Use Real Estate to Build Net Worth

Real estate has been the sole road to wealth for many of the world’s billionaires. Overall, there are 256 billionaires in the world whose main business is in real estate—up by 17 a year ago, according to the Hurun Global Real Estate Rich List 2020.

China is the leader at 137, 54% of the international total, the report shows. Hong Kong is home to the most real estate billionaires.

Meanwhile, the U.S. boasts 34 real estate billionaires, or 13% of the world’s total. New York has the highest concentration of real estate billionaires in the U.S., at 15, followed by Los Angeles and Newport Beach, Calif., at two each.

As of January, there were 2,816 billionaires in the world, according to the report.

“Overall it [was] a good year for [the] world’s biggest real estate entrepreneurs,” says Rupert Hoogewerf, chairman and chief researcher of the Hurun Report. The report was issued prior to the coronavirus pandemic.

Two Things That Make You Money In Property Development

No matter what you do in property development there’ll be just 2 things that will make you money in property development, innovation and marketing.

Innovation could be in the way you structure deals, or in the way you get your finance. It could also be in the way you negotiate your settlement terms & conditions and innovation could be in the way you design your stock or townhouses or apartment that you are about to develop, the one that you want to sell.

Innovation in finance is the way you get your finance or the way you get your funding. It could be set up in so many different ways. It could be a JV with the landowner, it could be a JV with the builder, and it could be JV with the money partner. It’s the way you source finance, different kind of finance.

You’ve got to be really creative with all of this and the only way you can be creative with all of this is if you know all the rules, if you know all the strategies, if you know how the mechanics of these deals work. You can innovate in finance, you can innovate in the way you structure your deals.

This is related to financial structures and you will need to consult your accountant in order to do that but you’ll have to also determine what your end purpose is, what you really want to do when the project is finished. That will determine the structure and you will need to get advice on it from your accountant.

Read Also: What Countries Are Good to Make Money in Real Estate

The third thing is terms and conditions. You could basically ask for anything and negotiate anything. It all boils down to you being innovative enough to be able to negotiate the kind of settlement terms for your property development project that are most favourable to you.

The fourth way you can innovate in property development is the way you design everything. It could be something, which is environmentally sustainable, or something that’s created with good energy rating, for example solar.

The second thing that makes you money in real estate development is marketing and the reason we say marketing is because we’ve got to really make something that you can sell. If you develop something that you can’t sell it’s going to be a problem towards the end of your project because the only time you actually get your money back is when you actually sell your stock.

Marketing, is very different from just engaging an agent, any more. The reason for that is the lenders and the banks are actually getting stricter and stricter with the amount of pre-sales they want, the amount of debt they want to cover before they can let you start construction.

Marketing comes in a lot earlier than it used to. When it comes in earlier that means you’ve got to have, you’ve got to sell everything off the plan. Imagine you going out and buying something off the plan, which has not been built, and you’ve got to be really certain about so many different things.

You got to make sure that you’ve got a good builder. You’ve got to make sure that you’ve got favourable terms. If the project is good, then everything boils down to the actual product. Can they actually see the floor plan? Can they actually see what it’s going to look like? Are the renders good?

In the real sstate industry you basically get what you pay for. If you’re offering peanuts you’ll get monkeys.

Don’t do that, just make sure that the kind of product that you are selling … If you’re selling something for $200,000 I’d say don’t bother with the render because it doesn’t work but anything above 500 and above 600K that you want to sell as your product towards the end of it or even off the plan you got to make sure that you’ve got some really good renders.

It is difficult for people, people who have been in the industry can visualize what it would look like but people who are getting in, buying your stuff, they won’t be able to visualize it. They really have to see what it looks like.

If you can really nail the 2 ends, this is the front end and there’s a back end and the front is innovation and creativity and the backend is marketing, making sure that everything that you’re developing is saleable, you’ll be a good property developer.

The key pitfalls to property development

Experience teaches you a lot more than you can ever learn in school.  Here’s just a few things you should put to heart

1. Always have a large buffer (cash reserve) in case something goes wrong.  This is hands down the biggest issue developers face
2. Don’t bite off more than you can chew. You don’t need to do the biggest development to make the most money.  Often it’s better to do several smaller developments to spread your risk.
3. GET ADVICE from professionals who have done this before. You’ll need
   1. A property development consultant – worth their weight in gold
   2. Charted accountant – will save you tens of thousands of dollars and protect your assets
   3. Professional mortgage broker – you won’t get anywhere without money.  A professional broker will mitigate some risks and make the process stress free

GET ADVICE – don’t ever underestimate advice.  Pay for it because the professional advisors have seen others pay for it through mistakes without advice and it’s a lot more costly.