Develop Yourself to be a Real Estate Developer
Ever thought about development or want to learn how to pick a great developer? In our latest episode we spoke with internationally acclaimed real estate developer, Beth Clifford. She gives insight into the attributes needed to successfully develop real estate.
But first, a bit of background on forcing equity.
For many recent years you could buy properties at “below replacement cost.” The basic idea of “buy low, sell high” drew a lot of interest, and many people jumped on the flipping train. Now there are not many properties like that. So that leaves us with another opportunity: real estate development.
Development is the same thing – it’s just a bigger project.
You can take an asset of land and add to it capital (via labor, building materials, equipment, etc.) and increase market value. This is what we at The Real Estate Guys call “forcing equity.”
To force equity, you don’t have to be a general contractor, developer or real estate agent. You have to be an organizer. Be able to pencil it out, get the right team together, and have a plan that makes sense.
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Bring the Skills You Already Have
Talented Beth Clifford, who’s led more than $3 billion in real estate development projects. She started out in IT and switched careers in her mid-thirties. How did she pull that off?
“I knew how to create a process and get the right people into the right chairs,” said Beth. “It’s all about the right people, right place, right time, and right resources.”
She used the same skill set she’d honed in her previous field – a sharpened ability to execute with a team – and learned the real estate vernacular and business process.
“If you understand at the highest level the business problem you need to solve, you break it into the pieces,” said Beth. “Break those pieces down.”
Say you have a piece of land. You know you need to build a building, coordinate utilities, etc. Talk to professionals and chunk it into individual pieces.
We see it like being an executive producer of a movie. You don’t need to know all the details. All of those key people with expertise can help – you be the strategic thinker and visionary to pull off a project.
Know Your Audience – Remove Your Risk
Whatever you’re going to produce, it has to be something people are willing to pay for.
We discussed this with Beth – your definition of “Minimum Viable Product” or MVP. Define it, and test the proof of concept. For example, can you attract a buyer with renderings, before the physical product is complete? Seek for validation from your potential buyer early on.
To lessen risk for the developer, Beth advises shortening time frames and maximize value. You want very little time (she recommends hours!) between getting your product finished and it being used.
In her firm, the team looks at what’s working and not working in a market, and then considers what could be different. That’s where they want to fit.
For example, Beth shares about her project redeveloping historic multi-million dollar homes, market class A, in the D.C. area.
They clearly understood their buyer: working CEO with a stay-at-home spouse, generally a highly social person. These were formal, gracious people. Much of the existing products in that space were big-box homes, “blow up with air” that offered no greater utility. Beth’s team created a different class, with private entertainment quarters. Those turned out to be the winning buildings.
They could sell them at a premium and turn them in less than a month.
Want to learn more about how you can know your market from Beth? She’ll share more success stories and useful tips in person at our Summit at Sea.
Never Race to the Bottom
One more thing Beth advises … watch out for the trap of becoming the “lost-cost option.”
Rather, she says, “I’m never involved where you’re racing to the bottom. The big production guys can’t be beat. They will always be able to come in under your cost.”
Instead, look where the current players are. What are they doing that works? What can be done better? Beth takes the mid-level market and increases the price of her product, with a clear idea of what the buyer is looking for.
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