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How to Become a Real Estate Developer. Steps to Get Started

How to Become a Real Estate Developer With no Money

By | 2020-02-03T09:07:29+00:00 January 31st, 2020|Hard Money Blogs|0 Comments

You’re here because you are interested to know how to become a real estate developer. An undeniably exciting career choice, the real estate industry is a profession most in demand.

With more and more homes, constructions, and industry being built, never have real estate developments been so popular.

A position where you don’t necessarily require a degree, this pathway is open to many.

Thus, determination, dedication, and experience are often more valuable skills here.

Here we look at what it takes to become a real estate developer.

How to Become a Real Estate Developer

First Things First, Learn the Basics of Real Estate Development

You may not need a college degree, but you will need to understand the basics of real estate. And, the only way you’re going to do this is through getting involved in this industry.

Successful developers tend to have years of local market experience under their belts.

So, it’s these people that you want to look towards in helping you get those most prime opportunities.

Yet this doesn’t mean that you can’t do anything more to improve your knowledge here.

Knowledge really is power in this industry. Therefore:

  • Arm yourself with the terminology
  • Read vastly around the subject
  • Keep yourself abreast of all industry news
  • Undertake a succession of online courses
  • Devote regular times throughout your day to studying the market
  • Consider doing a placement, training, or work experience in a local real estate office
  • Build your communication skills via different methods to work with a variety of people
  • Makes lots of good contacts everywhere you go

Create Your Business Plan

how to become a real estate developer

Some people create the most elaborate and visually stunning business plan only to fail as soon as they start implementing it. The reason for this – unattainable plans that require an immediate sprint do not hold up in this industry.

Therefore, if you’re new to real estate and developing, you’re going to want to set smaller goals to start with.

Consider the following in your plan:

  1. Who your target market is
  2. The sort of properties that appeal to this targeted market
  3. How you’ll obtain your funding
  4. What timescales and costs are expected regarding construction and/or renovation

Real estate career development is not about starting out by developing the biggest property you can find. Rather it’s about successfully setting and working towards sustainable goals. For example:

  • Acquiring one small cheap property to start
  • Developing it
  • Selling it on for a profit

So, when you develop your first business plan, consider doing so on a reduced scale to start. This will work in your favor as you will then be exposed to and be able to deal with:

  • Contracting issues
  • Zoning
  • Permits
  • Construction delays

Do Your Research

The best plan in the world won’t help you in your real estate endeavor if you fail to do any research beforehand.

A great deal of success in real estate investing and development is research. Therefore, before you commit to anything financially, get to know the situation in your selected areas.

  • Where is the most popular location?
  • Which location offers the best Return on Investment (ROI)?
  • Is buying or renting more financially sound as a prospect here?

Get Your Timing Right

Timing is crucial in the world of real estate. Therefore, when you begin looking for your property, you’ll need to stay calm.

With a good grounding of the market, research undertaken, a business plan drawn up, you’ll be well placed when the time is right to invest.

Part of the process here will include:

  • Looking at the sold prices of your chosen area
  • Calculating the floor and ceiling price for your desired project
  • Considering the difference between floor and ceiling values and what is driving it. Factors here can include interior conditions, good school proximity, good transport links, or other such notable reasons
  • Opening your eyes to the area you’re investing in
  • Looking at places where properties sell quickly
  • Looking to places where investment activity or construction is occurring – these tend to signal where places are on the up
  • Considering an area close and where you have good working knowledge but also further afield if it has a stronger growth potential
  • Not letting agents push you into making a quick decision without having done your research
  • Acting – Once you do find that most ideal property which ticks all boxes – then is the time to act swiftly to secure it

Sort Out Your Financing

how to become a real estate developer

How you finance your real estate endeavor will come down to personal choice. Though there are five basic options when financing property development:

  1. A buy-to-let mortgage – If your intention is to rent a property out one you’ve purchased it, you won’t be able to use a standard mortgage here. A buy-to-let mortgage is designed for this purpose. However, bear in mind they’ll usually attract larger deposits, higher interest charges, and bigger fees than that of standard mortgages. These are also usually interest-only.
  2. A buy-to-sell mortgage – Once again, a standard mortgage won’t suffice if you’re planning to sell on a property after you’ve bought it and renovated for this purpose. A buy-to-sell mortgage will allow you to sell the property shortly after purchasing. Again, you’ll need to expect higher interest rates, higher fees, and a substantial larger deposit for the privilege of this!
  3. A personal loan – An unsecured personal loan could be an option for a time whereby you’ve either inherited property in need of TLC, or you simply need some extra cash for current refurbishments
  4. A bridging loan – A short term loan solution, bridging loans are often answers for those looking to buy a property while waiting to sell another. These are higher interest loans but secured. They are, however also the more popular with those looking to buy, fix up, and sell property, therefore paying off the loan and interest as they do so. You will need to have a clear strategy for an exit plan when taking on a bridging loan.
  5. Cash – Perhaps not always the most accessible of solutions to those starting out. But, cash is one to bear in mind the further you get into your real estate developing career

Final Thoughts on Becoming A Real Estate Developer

Though a most exciting path to travel, becoming a successful real estate developer takes time. This is not usually the industry whereby you can make an instant fast buck.

Therefore, if you can approach it with a great deal of knowledge, research, planning, and financial solution behind you – you can start with the best mindset possible.

Best of all, you enter one of the most innovative industries with a bid to embarking on some wonderful and financially profitable long-term investments.

About the Author:

Yanni Raz is The Founder and CEO of HML Investments, with over 15 years in the real estate and hard money lending industry, Yanni is an expert in real estate investing, trust deed investments and more.

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