How to Become a Real Estate Developer
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Real estate development can be a glamorous and rewarding career. As a real estate developer, you can turn a vacant piece of land into a high-rise office tower or luxury boutique apartments.
But there’s nothing quick about it. The projects themselves and the education and training needed to get into real estate development take time. Here’s a primer on how to become a real estate developer.
- What is a real estate developer?
- A step-by-step guide: How to get into real estate development
- Getting started as a real estate developer
- The average real estate developer salary
What is a real estate developer?
A real estate developer is a person or company responsible for building or renovating homes, offices, retail centers or industrial sites. These projects can take vacant land or obsolete buildings and turn them into new businesses and homes.
Specifically, real estate developers buy property or partner with landowners, then develop a plan for what to build or rebuild on that property. They bring in investors and predict how much money the new homes or businesses will bring in. Developers then manage the construction and ultimately sell the project.
From start to finish, a job could take years to complete, with all of the stages of the real estate development process. Real estate developers have expertise in the following areas:
- Land acquisition
- Market studies
- Approvals and permits
- Project financing and financial analysis
- Building development
- Building renovations
What are the requirements for becoming a real estate developer?
You can start a real estate career right away, but it typically takes a few years and extensive work to earn the title of real estate developer.
In many cases, aspiring real estate developers should earn a bachelor’s degree and then gain the experience, training and additional education needed for investors to trust you with the capital needed to develop real estate. Below is a traditional path to becoming a real estate developer.
|Requirements for Becoming a Real Estate Developer|
|Education||Many aspiring developers will pursue a master’s degree in real estate or an MBA with a real estate concentration. There are also some real estate programs at the undergraduate level.|
|Certifications and licenses||Many employers or investors require certificates or continuing education from a real estate education organization like the CCIM Institute, NAIOP or the Society of Industrial and Office Realtors.|
|Experience||2+ years in the real estate industry|
|Skills||Communication, negotiation, interpersonal skills, patience, tactfulness, precision|
A step-by-step guide: How to get into real estate development
The title of real estate developer comes after years of education, training and experience. However, there’s a wide variety of career paths you can take to get into real estate development.
Step 1: Get the necessary education
Many universities offer undergraduate real estate concentrations within their business schools, which can be a good first step toward the education you’ll need for a real estate development career. There’s also a multitude of master’s degree programs in real estate and MBA programs with a real estate concentration.
These programs expose future developers to real estate law, finance, environmental remediation, public policy, urban planning, architecture and other necessary areas of development. They also tend to offer students project-based experience they can put in their portfolios, giving them the ability to start building relationships and networks within the industry.
However, you don’t need a degree in real estate to pursue a career as a real estate developer. Many real estate developers begin their careers in related fields, gaining experience and skills that transfer over. Later in their careers, developers who take this path may choose to earn a real estate certificate offered by numerous graduate schools.
Step 2: Gain experience in real estate
After graduation, there are two typical paths you can take to become a real estate developer.
The first takes you straight to a real estate development company. Some top graduates of real estate programs can get hired as junior development associates at a real estate development firm. Those in entry-level real estate development jobs might help with tasks like:
- Communicating with clients over the course of a project
- Developing budgets
- Lining up vendors and contractors
- Ensuring projects proceed on time
- Communicating with neighbors of a project
- Working on financial models
- Conducting market research
- Generally assisting more senior members of the firm
“You’re probably doing a little bit of everything,” said Jeff Engelstad, a commercial real estate developer. “You learn how to do it without using your own money, largely because you don’t have it.”
The second path takes you to related fields to gain experience that will translate to real estate development. Some people become real estate brokers, learning how to put together deals. Others go into building construction, finance, architecture or commercial lending. Down the line, these skills can be used to develop real estate or to get hired at a larger real estate development firm.
Step 3: Consider additional certification and courses
Many current and aspiring real estate developers pursue additional specialized education to advance their careers. Trade organizations offer numerous real estate development certificates and courses. For example, the CCIM Institute offers the certified commercial investment member (CCIM) designation, and NAIOP, the Commercial Real Estate Development Association, offers advanced certificates for commercial real estate development and real estate finance.
CCIM’s course offerings include a two-and-a-half-day crash course introduction to real estate development, a development workshop and a formal designation in commercial real estate that can take years to complete. Earning the CCIM pin requires courses in financial modeling, investments, market analysis and ethics, as well as a rigorous exam.
The NAIOP offers online and in-person classes, including certificate programs in commercial real estate development and real estate finance.
Getting started as a real estate developer
Becoming a real estate developer requires you to have full control over a piece of property in order to build on it.
“You can get a graduate degree from one of the best universities out there, and that doesn’t actually make you a real estate developer,” said Engelstad, who is also a senior instructor at the CCIM Institute. “You really either have to control a piece of land, own it or you have to have quite a bit of money.”
Here’s the process to get started in real estate development:
- Build relationships. Real estate development requires the help of different parties, such as investors to help finance the project, contractors to help build it and clients to buy it. Build these connections early on and nurture them.
- Find capital. A small-scale project typically costs around $10 million, which will be financed with around 30% equity and 70% debt, Engelstad said. That means a real estate developer will need to come up with around $3 million, at a minimum, he added. If you don’t have that on hand, you’ll need to recruit investors.
- Buy land. Now that you have access to cash, you need to acquire property to build on. You may purchase vacant land or older buildings to rehab or demolish.
- Develop a plan and get it approved. Real estate developers study the market to see what it needs, then design a building project to meet that demand. You’ll likely need signoff from the local government before breaking ground.
- Build. Once you get approval, you can construct the new building or rehabilitate the older one on your property.
- Sell the project. The goal is typically to return double the amount invested within 24 to 36 months, Engelstad said.
How to become a real estate developer with no money
Real estate development is expensive. And the general perception is that developers are all wealthy people. The reality? “It couldn’t be further from the truth,” Engelstad said.
While developers typically invest some of their own money, the bulk of the financing comes from commercial loans, and the majority of the equity in the project comes from investors. These investors could be real estate investment trusts (REITs), pension funds, private equity firms, family offices and other private investors.
You’ll need relationships with all of these entities to become a real estate developer with no money.
The average real estate developer salary
Real estate development is a relatively well-compensated field. Salaries vary widely, however, based on your experience and the type of job you have. The base median income for a residential project analyst, for instance, could pay $82,600 a year, while a top development executive could earn $279,400, according to the most recent real estate compensation survey from CEL & Associates.
The annual median salaries listed below for residential real estate development and construction roles come from the same survey, which is a widely respected benchmark.
|Job title||Median annual salary|
|Senior development manager||$169,400|
|Top development executive||$279,400|