Thinking about getting into real estate development or tackling your first construction project? 🏗️ In this video, Stephen Morris of AdviseRE shares a real-world breakdown of what it really takes to succeed in construction and development—from managing contractors and change orders to avoiding costly construction defects.
We cover:
âś… When and why to hire a general contractor
âś… Why nothing finishes on budget (and how to prepare)
âś… How to avoid devastating construction defects
âś… The chaos of job site management (the human element)
âś… Tips on site security & material theft prevention
âś… The emotional and financial rewards of seeing a project come to life
Whether you’re a real estate investor looking to build ground-up, or just curious about the reality of managing your own development, this is the deep dive you’ve been looking for.
🛠️ Spoiler: It’s not easy—but it can be worth it.
TRANSCRIPT:
Hello everybody, Stephen Morris here with AdviseRE. Today we are gonna shift gears and talk a bit about construction and development. These are two very exciting topics, which I believe, well—if you’re a veteran in the industry—they bring a bit of a sigh. You know, there’s a lot of pain and war stories around it. And if you’re new, I believe it’s generally misunderstood.
If this is an area that is of interest to you in terms of wanting to advance your career and eventually build out your own properties, I highly recommend that you be prepared for both the good and the bad that comes along with it.
So with that in mind, let’s get started. First, let’s talk about three key challenges: (1) your reliance on general contractors, (2) budget considerations, and (3) the human element.
If this is your first construction project, you’ll most likely need a general contractor. Unless you have significant construction experience, you probably won’t be doing an owner-builder play where you subcontract everything yourself. You may not yet have the know-how to build a property from the ground up.
Second is budgeting. Virtually nothing in construction hits on or under budget—unless you’re the most experienced operator in the world. Construction is filled with “unforeseen circumstances,” which by definition can’t be predicted. Even veterans deal with surprises. Whether you’re building software, a movie, or a house, new creations usually cost more than you think.
Third, and perhaps most important, is managing the people involved. You’ll have various crews on site at any given time. They all come with different motivations, skills, and compensation—each affecting your project’s outcome. Your ability to communicate and lead those people can determine whether you walk away with a successful project or a horror story.
Let’s go back to general contractors. Once you’ve selected one, you’ll rely heavily on them. One of the biggest mistakes I see is when clients have expectations but don’t communicate them. The less you communicate with your GC, the more likely things will go wrong. To avoid that, schedule weekly check-ins. Ask a lot of questions. If they’re unwilling to answer, that’s a red flag.
You don’t need to micromanage, but you should maintain strong curiosity. Walk through your plans. Compare what’s being built to what was approved. If something doesn’t match, ask why. It’s not uncommon for subcontractors to go rogue—especially if your GC is stretched too thin. Even if it’s technically your GC’s job to supervise, the reality is you’ll need to keep an eye on things yourself.
If you don’t have the knowledge to properly inspect the work, hire a qualified construction manager or owner’s representative. You want someone who understands framing, stucco, roofing, waterproofing—all the stuff that, if done wrong, leads to lawsuits or repairs that cost six figures.
Speaking of money, let’s talk about budgets. Staying on budget is one of the biggest struggles for new developers. Maybe you decide to upgrade finishes or improve layout mid-project. That’s fine—but late-stage change orders are far more expensive than pre-planned decisions. We’ve had this happen ourselves: something looks fine on paper, but once built, it’s clear it needs to change.
Even if you plan meticulously, you’ll never avoid all change orders. Plus, there’s market volatility. If you started planning your project during a downturn, but got permits two years later during a boom, your labor and materials might cost 40% more than expected. Budget overruns can be brutal. If your cash flow is thin, I don’t recommend diving into development. Start with stabilized properties and build capital before you take on the chaos.
Yes—chaos. That’s the name of the game in development. Contractors no-show, or show up a week late. Other trades are delayed because of it. Some contractors are unreliable, and you’ll only learn that through experience.
Another big issue is site security. Break-ins during construction are common. We’ve had people steal copper wiring worth $100—but it cost us $10,000 to replace. I strongly recommend investing in 24/7 monitored camera systems.
You also need to watch for bad craftsmanship. Contractors may cut corners to save $5,000, but it could cost you $150,000 to fix. Improper stucco installation is a great example. If they skip the weep screed or apply too thin a layer, you’ll end up tearing off the entire system and starting over.
Ask questions. Be annoying. Use AI tools like ChatGPT to educate yourself on construction systems. Cross-check what subcontractors are doing. You don’t have to be an expert, but you need to be informed.
Now—why go through all of this?
Because when done right, it’s deeply rewarding. You get to see something you imagined come to life. After raising capital, managing teams, and pushing through delays, you look at the finished building and say, “I did that.” There’s no better feeling.
And yes, if it’s done correctly, it can be very profitable. Construction at $250–$300 per square foot could result in sales at $600–$700 per square foot. That’s why developers take the risk—they’re chasing big returns.
So I hope this gave you a realistic feel for what construction and development entails. If you’re in the game or thinking about joining it, I’d love to hear from you. Feel free to email me with your experiences or questions. And of course, don’t forget to like and subscribe to our channel for more real estate and tax strategy content.
Thanks so much for watching, and I’ll see you in the next video.
