Between 2022 to 2030, it’s expected that the global real estate market will grow at a compound annual growth rate (CAGR) of 5.2%. As populations grow, demands for both residential and commercial spaces will increase, so there’s no better time than now to get into the industry.
One area of interest is real estate development, as you’re at the forefront of exciting new properties. If you approach it correctly, then this career can be highly profitable.
Do you want to learn more? Then read on. In this article, we’ll discuss how to become a real estate developer, step by step.
What Does a Real Estate Developer Do?
Before you consider a new career, it’s important to first understand what it involves. That way, you’ll know if it’s a good role and you won’t run into any huge surprises.
A real estate developer is someone who does the following for properties:
- Purchase
- Development
- Sale or lease
Often, they’ll transform land or outdated structures into new residential, commercial, or industrial spaces. So if you have a knack for reusing and repurposing things, then you might be a natural at this job.
In addition, a property developer should have a blend of skills in these areas:
- Finance
- Management
- Law
- Construction
- Marketing
You’ll manage the entire lifecycle of a project, so as you can see, you should be a jack of all trades to be successful. To make this happen, you should follow the steps outlined in the rest of this post.
Gain Relevant Education and Knowledge
To become a real estate developer, you should have a bachelor’s degree in a related field. This can be in business, engineering, management, finance, etc. Otherwise, it can be challenging to navigate this industry, and you may end up making poor choices that’ll waste your time and money.
If you already have a degree in a related field, then go a step further. Obtaining a master’s degree in real estate development can give you a leg up. Additional certifications can be beneficial too, so consider getting a real estate license or completing specialized real estate development programs.
In many fields, you’ll need a real estate license to work anyway, and it’ll offer valuable insights into the industry, so it’s best if you take care of this ASAP. Do note that there’s no such thing as a real estate developer license, so the closest thing is a real estate one.
Most importantly, you should develop your relevant skills. Learn about zoning laws, property management, urban planning, and financial analysis by attending workshops, reading industry publications, and following market trends. Taking time to hone these skills can really pay off.
Build Industry Experience
Most likely, you won’t be able to start out as a real estate developer immediately. So you should get your foot in the door by working in a related field with entry-level roles. You can try:
- Real estate sales
- Property management
- Construction
- Finance
Ideal roles that can provide foundational knowledge include analyst, real estate agent, or project manager.
While you’re building your industry experience, don’t forget to network by attending real estate events and joining organizations. Having connections with people such as architects, engineers, contractors, brokers, and lenders will make your time as a real estate developer much easier.
Set Up Your Company
After you’ve gained industry experience, it’s time to set up your company. One of your best options is creating a limited liability company (LLC), as it gives you personal liability protection, which means your own assets aren’t at risk in case of lawsuits or financial issues related to the project. Plus, it gives you professional credibility.
Quite often, real estate developers will create a separate LLC for each of their developments, so that if the worst happens, any liabilities or financial issues are confined to that particular project and don’t impact other assets or developments. This structure also simplifies project-specific accounting and allows for more transparent partnerships or investments, as each LLC can have its own set of stakeholders tailored to the specific development.
Additionally, a dedicated LLC per project can make it easier to sell the development upon completion, as ownership can be transferred directly through the sale of the LLC itself.
While you can always go through this process alone, it’s better if you use our business registration service. It’s free (minus state fees), and you can pick and choose other affordable services to add on if you wish.
Secure Financing
We’re not going to lie: when learning how to get into real estate development, an essential thing you’ll need is large sums of money. Typically, developers require financing from sources other than themselves; this is usually a mix of equity from investors and debt from loans or mortgages. To secure either one, you’ll have to demonstrate a solid return on investment (ROI).
Needless to say, you’ll have to establish relationships with banks, venture capitalists, and private lenders. Because this industry is so relationship-driven, you’ll come out on top if you have strong ones.
To do this, you should create a compelling business plan. It should have project objectives, financial projections, timelines, and risk assessments. Not only will this give you better direction, but it’ll surely attract investors and lenders.
Research and Choose Your Market
Even though there’s a huge demand for all sorts of spaces, you still have to choose wisely. Otherwise, you might pick the wrong locations for development, which can have huge financial consequences.
You should study demand in specific neighborhoods, as well as the demographics, population growth, and economic factors. Plus, look at recent property trends and vacancy rates.
Consider conducting feasibility studies too, as these studies will help you avoid overestimating demand or underestimating costs. They’ll take into consideration things like:
- Costs
- Potential revenue
- Competition
- Zoning regulations
Other types of research you should utilize include comparative market analysis (CMA), local government reports, and specialized studies from market research firms.
Learn About Land Acquisition and Zoning
Now that you have a game plan in place, the next step is acquiring land. Research areas with growth potential and work with local real estate agents to explore off-market deals. Think about networking with property owners to find land too.
You can’t just automatically build though. Zoning laws dictate how land can be used. Here are the categories:
- Residential
- Commercial
- Industrial
- Mixed-use
Many developers work with municipal authorities to secure permits or request zoning changes if needed, so this is where established relationships come in handy.
Other issues to consider include environmental restrictions, building codes, and any specific local regulations.
Assemble a Strong Team
You won’t be able to go solo, which means you’ll need trusted team members by your side. Roles to fill include:
- Architects
- Engineers
- Contractors
- Legal advisors
- Financial analysts
- Sales/marketing professionals
Outside of your well-rounded team, you should build a reliable network of consultants and contractors. This network can streamline future projects and keep your revenue streaming in.
As for project management, you can handle that yourself if you’re experienced. Otherwise, you should hire someone who knows their way around budgeting, maintaining schedules, and coordinating different team members.
Consider Sustainable Development Practices
We only have one planet, so everyone should do their part in preserving its resources. Think about obtaining green building certifications, like ones through LEED. You should also use energy-efficient designs, which can reduce operational costs.
Check with the government to see if there are tax incentives and grants available for sustainable building projects. Not only can this reduce costs, but it can enhance ROI too.
By adopting sustainable development practices, you can set yourself apart from your competition. You’ll attract environmentally conscious tenants and investors, and as a result, you’ll get long-term value.
Know How to Become a Real Estate Developer
Knowing how to become a real estate developer is half the battle. Truthfully, it’s a challenging career, but if done right, it can be highly rewarding as well.
So if you have a strong drive, a love for real estate, and some creativity and leadership, it’s possible to build an empire in this industry.
Sign up with Business Anywhere today to use our free business registration service. Our experts can assist with any company formation questions and point you in the right direction.
