Successful Real Estate Developers Have These Key Traits

Real estate developers come in every walk of life but what is it that makes someone successful at real estate development? Are they smarter? Do they work harder? A lot of people want to be successful real estate developers, but I promise you it is not for the faint of heart. I think there are many traits that make someone more likely to be a successful real estate developer which I describe further in this article.  But first…

Why is it difficult to be a real estate developer?

Being able to seize the many amazing opportunities in development is definitely not easy.  There are so many different types of properties that can be developed, both residential and commercial, and the development process from beginning to end can be very expensive.  If you tried to do a comparison on developing real estate versus investing in real estate, you would quickly come to the conclusion that they are two totally different animals.

Similar to real estate investing, most people probably do not have all the money required to go out and develop their project. You will need to borrow money, which can be a fairly simple process if you want to buy a house to live in, but it is not as easy if you want to develop a property.

When developing a property, especially small-scale ground up projects, you would first need to have the funds to acquire the land and start pre-development activities before ultimately getting a construction loan for the build-out.  For larger development projects, the land acquisition and funding process can be even more complex.

You would also have to ask yourself the question of what type of developer will you be? You can be an at-risk developer (where you are personally liable and accountable for a development project) or a fee-based developer (where you are hired by an owner of a project to manage the entire development process but not be financially at risk).

For fee-based developers, there are different strategies and amounts of money needed for each type of development. In general, though, lenders prefer that you have a minimum of 20% equity in your deal.

What are the traits of a successful real estate developer?

I have been a real estate developer since 2016.  Real estate developers hold leadership roles in their project teams and also in the communities that they work in. The successful developers that I’ve met and networked with in that timeframe tend to have the characteristics below: 

High risk tolerance

To be a real estate developer you must be willing to take risks.  The main thing here is that those risks should be well-thought out and calculated.  Developers spend a lot of money on their development projects.  Sometimes those projects may start and unfortunately never finish due to projects running out of money.  Other times their projects make money for themselves and their investors and they are able to benefit from the rewards.  To realize the rewards, developers usually put risk mitigation plans in place to help ensure a project’s success.

Knows their numbers

Not knowing all the costs involved in your development project can literally be the difference between a successful or failed project. You will need to know your soft and hard costs, the percentage needed for contingency, and be able to model best- and worst-case scenarios. Also important is to be able to effectively communicate what your project costs are to potential lenders to increase your chances of getting funding. Those who are successful spend a lot of time reviewing their development budget over and over again to make the necessary adjustments well before a shovel hits the ground.

Constantly learning

Many successful developers have not obtained formal education from a recognized real estate development school or program. They have instead learned by doing, reading books, forums, and websites. Whatever combination of learning is used, it must be constant and leveraged with other people’s experiences.

Creative

Developers have an uncanny ability to create something from nothing, such as being able to take a parcel of vacant land and build a visually appealing structure on it to adaptively reusing an existing property.  All of this first starts with an idea and successful developers are able to bring their ideas to life. 

Able to establish and keep important relationships

Real estate is first and foremost a people business. Establishing and fostering relationships with city officials, architects, lenders/brokers, general contractors, politicians, and other professionals in the field is very important for success.

Solves problems

Above anything else, real estate developers are problem solvers.  They are able to identify a problem, assess all the moving parts of the problem, leverage the skills of their project team, and ultimately come up with the best way forward to finding a solution.  Being able to solve problems is needed in all phases of a development project.

Conclusion

The great thing about all of the traits described above is that they can be cultivated if you feel you don’t currently have them and improved upon if you do.  While you work on becoming stronger in any of these traits you can always hire team members who can fill the gaps that you are not strong in. 

I encourage you to keep going; real estate development takes time and requires strong will and persistence.  It will test you in ways you probably haven’t thought of.  If you want to be successful at it, align yourself with others in the field and commit to learning.

I have written a quick guide that identifies some of the biggest mistakes to avoid as a new real estate developer.  You can get a copy of the guide by clicking here.

What are some other key traits that you think real estate developers should have? Leave a comment below.