Do any of you know any developers and how they got started? I'm trying to understand just how these guys get going and how they manage to raise so much money.....
Developers
- Thread starter 97K15004WD
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Developers as in people of plan communities and facilitate the building of a neighborhood.
or
Developers as in software programmers?
or
Developers as in software programmers?
I assume you are asking about real estate developers.
There are usually two loan types needed to finance a real estate development project-short term financing that funds the construction and lease up phase of the project. Then long term financing can take over after the project is stabilized and leases up to market level. Sometimes the two loans are combined into a mini-perm loan.
Real estate developers rarely use their own money-it's one area where massive up front costs are met with a commercial construction loan.
There are usually two loan types needed to finance a real estate development project-short term financing that funds the construction and lease up phase of the project. Then long term financing can take over after the project is stabilized and leases up to market level. Sometimes the two loans are combined into a mini-perm loan.
Real estate developers rarely use their own money-it's one area where massive up front costs are met with a commercial construction loan.
Property developers find a piece of property which can be bought at a reasonable price and which will be worth a whole lot more once it is "developed" with a building, or water park, or whatever. Then they go to a bank and borrow against the projected sales price or income potential, paying the loan back when they sell, or generate rental income. There is risk involved, which banks compensate for with high interest rates.
Originally Posted By: HerrStig
Property developers find a piece of property which can be bought at a reasonable price and which will be worth a whole lot more once it is "developed" with a building, or water park, or whatever. Then they go to a bank and borrow against the projected sales price or income potential, paying the loan back when they sell, or generate rental income. There is risk involved, which banks compensate for with high interest rates.
+1 for the above comment. And I have also wondered how these people get started, since they tend to be very wealthy people.
Property developers find a piece of property which can be bought at a reasonable price and which will be worth a whole lot more once it is "developed" with a building, or water park, or whatever. Then they go to a bank and borrow against the projected sales price or income potential, paying the loan back when they sell, or generate rental income. There is risk involved, which banks compensate for with high interest rates.
+1 for the above comment. And I have also wondered how these people get started, since they tend to be very wealthy people.
Yep, I was asking about real estate developers. Sorry about that - should have been more clear.
To the point of borrowing from the banks, around here they don't seem to do that much. They approach the city government, or a federal agency. Then they present a plan. Then the agency pays for the "infrastructure" and land development. Then the GC's come in and begin building.
It seems city run development boards "assist" and seems the banks want nothing to do with these types of projects. It appears to be investors for the large part, and banks for the smaller parts that can be collatoralized.
I just wonder because it seems like a good career field but it does appear to depend on "who you know".
Do you guys see that too?
To the point of borrowing from the banks, around here they don't seem to do that much. They approach the city government, or a federal agency. Then they present a plan. Then the agency pays for the "infrastructure" and land development. Then the GC's come in and begin building.
It seems city run development boards "assist" and seems the banks want nothing to do with these types of projects. It appears to be investors for the large part, and banks for the smaller parts that can be collatoralized.
I just wonder because it seems like a good career field but it does appear to depend on "who you know".
Do you guys see that too?
Donald Trump had connections through his father....
I know of 3 developers who started from nothing in that business.
The successful one was a farmer who sold most of his land to fiance the development, had the tractor to do the dirt work, and was the general contractor. He build 3 bedroom, did not meet universal building code, poor quality homes. Then his second dev was big poor quality homes.
The other 2 used banks for loans, and went bust. One of the banks waited until they had 3 spec homes and were getting offers before pulling the plug. He says it was planned that way. Ruined him financially.
The other built one spec home, and sold it at about break even. Seeing the handwriting on the wall that you have to build super cheap low quality homes, and not wanting to play that game, he got out. Made about 2 dollars an hour for his efforts.
People would say this is a nice 1400 ft2 home, but I can get this 1600 ft2 home for the same money.
Rod
The successful one was a farmer who sold most of his land to fiance the development, had the tractor to do the dirt work, and was the general contractor. He build 3 bedroom, did not meet universal building code, poor quality homes. Then his second dev was big poor quality homes.
The other 2 used banks for loans, and went bust. One of the banks waited until they had 3 spec homes and were getting offers before pulling the plug. He says it was planned that way. Ruined him financially.
The other built one spec home, and sold it at about break even. Seeing the handwriting on the wall that you have to build super cheap low quality homes, and not wanting to play that game, he got out. Made about 2 dollars an hour for his efforts.
People would say this is a nice 1400 ft2 home, but I can get this 1600 ft2 home for the same money.
Rod
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Well I think any type of developer needs to have an awesome cheer captain...
http://www.youtube.com/watch?v=8To-6VIJZRE
http://www.youtube.com/watch?v=8To-6VIJZRE
What specifically do you want to know? I do spec houses, custom if I can't avoid them, flip land, develop land, now I'm getting into rental complexes. Just finished my first 9, and working on approving an 18.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
I started at 18 trying to sell real estate, than transitioned over to the construction side. My first summer their I worked for my uncle and washed his machines and swept floors. I also drove a $700 VW.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
I started at 18 trying to sell real estate, than transitioned over to the construction side. My first summer their I worked for my uncle and washed his machines and swept floors. I also drove a $700 VW.
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Originally Posted By: hattaresguy
What specifically do you want to know? I do spec houses, custom if I can't avoid them, flip land, develop land, now I'm getting into rental complexes. Just finished my first 9, and working on approving an 18.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
Did you start by buying houses to flip after some renovations?
What specifically do you want to know? I do spec houses, custom if I can't avoid them, flip land, develop land, now I'm getting into rental complexes. Just finished my first 9, and working on approving an 18.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
Did you start by buying houses to flip after some renovations?
Originally Posted By: 97K15004WD
Yep, I was asking about real estate developers. Sorry about that - should have been more clear.
To the point of borrowing from the banks, around here they don't seem to do that much. They approach the city government, or a federal agency. Then they present a plan. Then the agency pays for the "infrastructure" and land development. Then the GC's come in and begin building.
It seems city run development boards "assist" and seems the banks want nothing to do with these types of projects. It appears to be investors for the large part, and banks for the smaller parts that can be collatoralized.
I just wonder because it seems like a good career field but it does appear to depend on "who you know".
Do you guys see that too?
What kind of project are you talking about? The state and federal governments offer grants for building various kinds of housing. Typically its low income and located in cities like Hartford for example. That's a very, very specific sector in the vast world of real estate development. However if you take those grants the government owns you, again only a very few players do.
Yep, I was asking about real estate developers. Sorry about that - should have been more clear.
To the point of borrowing from the banks, around here they don't seem to do that much. They approach the city government, or a federal agency. Then they present a plan. Then the agency pays for the "infrastructure" and land development. Then the GC's come in and begin building.
It seems city run development boards "assist" and seems the banks want nothing to do with these types of projects. It appears to be investors for the large part, and banks for the smaller parts that can be collatoralized.
I just wonder because it seems like a good career field but it does appear to depend on "who you know".
Do you guys see that too?
What kind of project are you talking about? The state and federal governments offer grants for building various kinds of housing. Typically its low income and located in cities like Hartford for example. That's a very, very specific sector in the vast world of real estate development. However if you take those grants the government owns you, again only a very few players do.
Originally Posted By: IndyIan
Originally Posted By: hattaresguy
What specifically do you want to know? I do spec houses, custom if I can't avoid them, flip land, develop land, now I'm getting into rental complexes. Just finished my first 9, and working on approving an 18.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
Did you start by buying houses to flip after some renovations?
No I started buying dirt that no one wanted, but that was after of about a year of reading up on the local zoning laws so I knew them backwards and forwards.
My very first deal was a house with an empty lot next to it, the old man who lived in it died. I bought it and split it off. I had to do minor renovations on the house but I sold it off and broke even, the money was in the dirt.
My second deal was another empty lot which a lot of people thought could not be built on. The old lady who owned it wanted it gone, paid her only $50k for it, sold the house 5 months later for $350k. That was a good score.
Originally Posted By: hattaresguy
What specifically do you want to know? I do spec houses, custom if I can't avoid them, flip land, develop land, now I'm getting into rental complexes. Just finished my first 9, and working on approving an 18.
My bread and butter is getting dirt approved that no one thought could be built on, very profitable.
Did you start by buying houses to flip after some renovations?
No I started buying dirt that no one wanted, but that was after of about a year of reading up on the local zoning laws so I knew them backwards and forwards.
My very first deal was a house with an empty lot next to it, the old man who lived in it died. I bought it and split it off. I had to do minor renovations on the house but I sold it off and broke even, the money was in the dirt.
My second deal was another empty lot which a lot of people thought could not be built on. The old lady who owned it wanted it gone, paid her only $50k for it, sold the house 5 months later for $350k. That was a good score.
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Originally Posted By: 97K15004WD
Do any of you know any developers and how they got started? I'm trying to understand just how these guys get going and how they manage to raise so much money.....
It's not a get rich quick process.
Study the area you are interested in, ascertain the future growth patterns, and purchase real estate in the area while it can be done inexpensively. This is best done with income from another job, occupation, or business so the property can be parked without pressure to be getting income from it, if it's bare land, or something that can be rented out and depreciated if it is already built out with something. Then you wait for the "development" to come to you. This can be years, or even decades, or never. if it does, it's not unheard of for a five figure piece of property to be a seven figure piece of property a decade or so later, depending on what comes along. The best use at that point may be residential, commercial, or mixed. That part is hard to predict.
When it comes, you can sell the properties for a good profit, less the dreaded long term gain on real estate tax, and those profits can fund all or part of the properties you want to keep and develop. By that point, you can see where things are at and put up a spec building to lease out, or find a good long term tenant you can build out for, or start your own business in the property.
Personally, I think it's a good idea to always use as much of your own money as possible. You never want to own less than sixty or seventy percent. Use whatever money you make from the ones that work to offset the loss from the ones that don't, or are still in the wait, and use whatever profit is left over to keep the process going.
The people that I know that were (are) successful did it this way. The flash in the pan types can be over extended when the inevitable cyclical downturn comes along, and don't have staying power.
Do any of you know any developers and how they got started? I'm trying to understand just how these guys get going and how they manage to raise so much money.....
It's not a get rich quick process.
Study the area you are interested in, ascertain the future growth patterns, and purchase real estate in the area while it can be done inexpensively. This is best done with income from another job, occupation, or business so the property can be parked without pressure to be getting income from it, if it's bare land, or something that can be rented out and depreciated if it is already built out with something. Then you wait for the "development" to come to you. This can be years, or even decades, or never. if it does, it's not unheard of for a five figure piece of property to be a seven figure piece of property a decade or so later, depending on what comes along. The best use at that point may be residential, commercial, or mixed. That part is hard to predict.
When it comes, you can sell the properties for a good profit, less the dreaded long term gain on real estate tax, and those profits can fund all or part of the properties you want to keep and develop. By that point, you can see where things are at and put up a spec building to lease out, or find a good long term tenant you can build out for, or start your own business in the property.
Personally, I think it's a good idea to always use as much of your own money as possible. You never want to own less than sixty or seventy percent. Use whatever money you make from the ones that work to offset the loss from the ones that don't, or are still in the wait, and use whatever profit is left over to keep the process going.
The people that I know that were (are) successful did it this way. The flash in the pan types can be over extended when the inevitable cyclical downturn comes along, and don't have staying power.
I should probably just stay off the keyboard...but I don't care for 90% of the 'developers' I've seen operating over my years. It seems lots of them are kinda 'connected' guys with a gift for gab and 'blue sky' types who are all about aquiring big bucks and care little about what they leave behind. There have been lots of problems with ethical conduct and lawsuits-mostly merited in my view. They come and go and may reappear with a new corporate name as the previous was mud. I don't love the bankers, but understand why they would want to limit exposure. These guys fight over keeping building code minimums as low as possible-so stupid thin residential 1/2" plywood roof decks and lousy stick built multi-story firetrap apartments go up with shorter lifespans.
If you avoid the get the thought of get rich quick it can be a decent adventure.
Yes it(get rich) happens but there is luck involved and market timing. Both of which you have no control over. You can control other variables.
Maybe try to work with a developer outfit and see what you can learn and injest beyond reading.
Yes it(get rich) happens but there is luck involved and market timing. Both of which you have no control over. You can control other variables.
Maybe try to work with a developer outfit and see what you can learn and injest beyond reading.
Originally Posted By: zzyzzx
Originally Posted By: HerrStig
Property developers find a piece of property which can be bought at a reasonable price and which will be worth a whole lot more once it is "developed" with a building, or water park, or whatever. Then they go to a bank and borrow against the projected sales price or income potential, paying the loan back when they sell, or generate rental income. There is risk involved, which banks compensate for with high interest rates.
+1 for the above comment. And I have also wondered how these people get started, since they tend to be very wealthy people.
Old money and connections. Or very good luck are what are required.
Originally Posted By: HerrStig
Property developers find a piece of property which can be bought at a reasonable price and which will be worth a whole lot more once it is "developed" with a building, or water park, or whatever. Then they go to a bank and borrow against the projected sales price or income potential, paying the loan back when they sell, or generate rental income. There is risk involved, which banks compensate for with high interest rates.
+1 for the above comment. And I have also wondered how these people get started, since they tend to be very wealthy people.
Old money and connections. Or very good luck are what are required.
It does seem to be that way. Well connected folks seem to be the ones that are most successful at this - at least based on what I have seen. I'm trying to figure out why these guys are able to get people to invest. It's all about the trust and knowing the legitimate from the scammers I guess.....
Finding investors is challenging at first but after you have a good track record they are not so hard to find.
A lot of guys use a lot of private money and you would be amazed at who has a few hundred thousand sitting around they would love to earn a better return on.
The most important aspect is education. You need to educate yourself on your local zoning laws, and you need to know your local market. Once you have the knowledge you can start to find deals. The world of real estate is vast so you need to learn a bit and figure out in which area you want to be.
A good way to get into the game with no money is to bird dog deals for other investors.
If you look in your area their are probably investor groups that get together. Or you can meet them in other places, they tend to travel in similar circles.
Do you boat or golf? If not I suggest you buy a set of clubs and learn.
A lot of guys use a lot of private money and you would be amazed at who has a few hundred thousand sitting around they would love to earn a better return on.
The most important aspect is education. You need to educate yourself on your local zoning laws, and you need to know your local market. Once you have the knowledge you can start to find deals. The world of real estate is vast so you need to learn a bit and figure out in which area you want to be.
A good way to get into the game with no money is to bird dog deals for other investors.
If you look in your area their are probably investor groups that get together. Or you can meet them in other places, they tend to travel in similar circles.
Do you boat or golf? If not I suggest you buy a set of clubs and learn.
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