What It Takes to Become a Developer (2023 Edition)
I get the question of what it takes to become a developer and start your own project quite often from my clients as well as colleagues in the real estate profession. Honestly, development is incredibly challenging and requires a large combination of skill sets to successfully pull off. It’s definitely not as easy as “buy land, hire an architect, hire a general contractor, then profit.” I’ve been in the development space for over 9 years and what I’ve learned is that everyone can bring something to the table, but nobody can bring it all to the table.
Typical Background of a Developer
Developers come from all walks of life and careers and based on my experience, very tough to point to one career that’s the absolute best path to becoming a developer. Here is a list of the typical professions I have seen in my career who eventually started running their own projects. Plus I’ll give you my perspective on their respective strengths and weaknesses and why a great developer is someone who plays to his/her strength and then surrounds themselves with people who can fill in for their weaknesses.
Architect - Seems obvious here and being an architect is a great place to start as a developer. Architects typically understand design, aesthetics, and like to build projects that people are excited about. Exciting projects draw in high rents/sales prices which leads to profitability. Further, most architects are pretty savvy with local building codes and zoning and can fairly easily get an assessment of the possibility of a buildable footprint on a potential project site. The weaknesses architects face tend to be that they are not cost conscious and focus too heavily on beautiful design. While it would be great to build an award winning building, construction costs and economics tend to get in the way. A beautifully designed building that’s over budget will lead to a very poor developer. Architects are best served by collaborating with engineers and general contractors and focusing on cost first and carefully considering aesthetic upgrades second.
Engineer - Engineers are a crucial piece of every development. A great engineer is worth their weight in gold if they can design your building to meet or exceed building codes while ensuring that costs are checked through efficient design/materials. Engineers typically don’t have the design chops of an architect but they have an eye for what it takes to build the project. The weakness that engineers usually have to fill is that they are mathematically driven and lack the creativity or vision to see a property and imagine a building that would draw people to want to occupy it. They are best served by collaborating with creative types, particularly ones who like to take risks so that they can be propelled towards making bolder decisions which would lead to a profitable project.
General Contractor - General Contractors make fantastic developers since they know the ins and outs of how to build a building. They are in tune with material costs, have access to labor, and generally know what it takes to pass inspections and get a building from concept to reality. However, general contractors are builders first, real estate people a distant second. Contractors tend to not have a good feel for the real estate market place (since their focus is construction, not the real estate market). As such, they are not typically in tune with rents and sales prices nor do they track demographics or recent events that could lead to new opportunities in the marketplace to start a project. General contractors are best served by working with a real estate broker who knows valuations and trends and can push them towards finding a property that is positioned to make a profit.
Broker/Salesperson - Brokers bring market expertise to the table which is incredibly valuable. Most brokers know local rents and sales comps and tend to understand trends in the marketplace. Because they work with buyers, they know what’s typically in demand and can identify areas of opportunity way faster than any other profession listed here. The drawback is that brokers tend to be very risk averse and also not highly organized for project management. They also don’t know costs or what it takes to build a project. They are best suited to team up with a general contractor and architect to help them hone in on costs and build a succesful project.
Property Manager - I personally am biased towards property managers having the most advantages in what it takes to be successful developers. They tend to have a fairly well rounded skill set, where they are in tune with the rental market, what tenants want, what type of amenities are in demand what amenities should be chopped from a program. They frequently engage maintenance teams and oversee major repair projects, which gives them deep familiarity with costs as well. Property managers tend to get bogged down in the minutiae however with their own work, since managing tenants and their needs can keep their eye off being strategic and stepping back to have a handle on the big picture. A good fit for a property manager to team up with would be a broker who can focus on the market and present opportunities to them.
Finance Guy/Gal - This one is near and dear to my heart since that’s me! I use the term Finance Guy/Gal to encompass anyone who is the fundraiser and numbers person. This could be a CPA, investment banker, lawyer, or any other professional service that has access to a wide array of clientele and a strong network. Finance people tend to be organized and well networked. Their access to capital makes them a valuable piece of the puzzle towards getting a capital intensive project like a development off the ground. Because they don’t specialize in the real estate market, they are not in tune with trends in the marketplace and typically need a combination of broker, general contractor, and architect to figure out how to assemble a deal.
I started this path as a Finance Guy. As a CPA, I developed relationships with all of the above to become a well rounded developer. I became a broker later in my career to gain the skillset in understanding the market and linking up capital to projects. Through my consistent interactions with the remaining professions above, I gained a high level understanding to be able to conceptualize and price out projects, but of course I still lean in on to narrow in on economics.
Eventually, a developer will more or less become an amalgamation of all of the professions above while still leaning in on each one through specialists to hone in and overcome project challenges.
My business partner, Eric, started off on the broker side and developed into a property manager and general contractor. I credit my career as a developer solely to him, since he pushed me, as a risk averse accountant, to get out there and believe that a piece of dirt with an old run down house could be an amazing community where multiple families could live and thrive.
Which leads me to my last point — as Morpheus told Neo in the Matrix, you must free your mind and believe. No matter how much due diligence you do and how much careful analysis you prepare, you can’t mitigate 100% of your risk in developing a project. You have to do your best, address as much risk as you possibly can, and then jump in with both feet and make it happen. Through experience and time, you will get better and eventually become an old, wise sage who teaches the young’ns how it’s really done.
-Stephen Morris
