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How do I begin in real estate development with little cash?

Femaleleader

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I'm interested in real estate development and I've been for many years but I've never known where to begin. I'm 36 years old and now would like to begin but now so confused as to where to begin. I have done some research online and also read through threads here on FastLane and many advise to just go out there and begin. but HOW?? I'm interested in commercial real estate. Or is residential better? I'm ready to dive into every zoning law book there is.

I would appreciate every advice. I need it. I need to know and understand what awaits me.
 
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Envision

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Go to your local investor meet ups and start to learn from the community. You need to figure out what you want to do and start to identify your route to getting there. Development requires capital and a good amount of knowledge when it comes to your city's planning and zoning. You'll most likely want to partner with someone that knows what they're doing so you can have the opportunity to get first hand experience.
 

Femaleleader

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Go to your local investor meet ups and start to learn from the community. You need to figure out what you want to do and start to identify your route to getting there. Development requires capital and a good amount of knowledge when it comes to your city's planning and zoning. You'll most likely want to partner with someone that knows what they're doing so you can have the opportunity to get first hand experience.
Thank you. Great idea. I'll do that
 
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BrandonS85

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Pretty much all of what has been said above.


You need tons of experience to do real development (Spec homes, subdivisions, housing developments, etc). That kind of knowledgebase can take 20-40 years to do right. I would recommend you look at wholesaling, flipping, landlording and any of the buy & hold flavors out there for a bare minimum of 3-5 years before you seriously look at true development.
 

socaldude

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One of my personal friends started out small. He is an attorney. Used his student loans to flip a small home.

You gotta know zoning laws, contracts, real estate math etc.

There really isn't an easy way. Save your money, be an individual people are willing to bet on(investors). Have a good credit score.

Your question exposes the barrier to entry.:rofl:
 

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Paul Weese

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I've done real estate development off and on for years. It usually takes a team to pull it off, including an attorney and a builder. And I've always used little cash. I recommend putting a package together and as you do, you'll find if the deal has enough money in it to attract investors. If a community has residential growth, then it will need more commercial units. Everyone needs a place to live, but not everyone wants to go out to eat or rent an office.
 
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SteveO

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Definitely easier if you have money. Most commercial transactions have what is known as a "capital stack". The goal is to get enough money for the deal. It will be difficult to fill that stack to capacity using other people's money. You will be expected to have a strong background which includes having a history of "wins" under your belt coupled with a good deal. Most investors, private money, banks will want to see that you have something at risk along with them.

Now with that said, a great deal can overcome a lot of objections. Framing that great deal for others to see will be important. Everyone thinks they have a great deal and the people with money see too many mediocre deals labeled as great.

All the people putting money in are going to want a piece of the action as well. The first 60% will take the least risky stake and the lowest returns. As the risk levels rise, the take increases. The margins thin out dramatically. The last 10-15 percent of the stack may require total say in the deal and may even want title in their name. If there is a chance that hiccups will take this into negative territory, money will pull out. All investors are going to want protection for their money and will want solid legal contracts that will put future risks on you.

By starting small and using your own money, you have the ability to learn and grow without all the other distractions. Find a bank that will work with you and figure out a way to put cash together.
 

ALC

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I have a question, related to this : Where can i find the most succesful / successful R.E investors ?
I presume these guys don't have the time to go to seminars, only beginners go to these events..
It would be great to know where i can find one and speak with him and why not having him for mentor for future investments.
 

Paul Weese

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I have a question, related to this : Where can i find the most succesful / successful R.E investors ?
I presume these guys don't have the time to go to seminars, only beginners go to these events..
It would be great to know where i can find one and speak with him and why not having him for mentor for future investments.
I've found them to be of all types: busy/not busy, going to seminars/not going. Getting out and talking to one will lead to another and so on. The key is to start communicating. When you find someone that interests you, take them to coffee/lunch.
 
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BrandonS85

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I have a question, related to this : Where can i find the most succesful / successful R.E investors ?
I presume these guys don't have the time to go to seminars, only beginners go to these events..
It would be great to know where i can find one and speak with him and why not having him for mentor for future investments.

Find your local REIA, make some friends, buy them lunch.

I eat lunch at a bare minimum once a week (Sometimes twice, even three times) with an established investor in my area. I started doing this about 2 years ago. I've been growing so much that I'm getting within striking distance in terms of total assets under ownership of the guys in the business for 20+ years. They all want to help and talk about deals, for most of these guys that's all they care about - Business, making deals etc.

I've doubled what I own just in 2017, and almost all my deals were from personal referrals and word of mouth.
 

WJK

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I'm interested in real estate development and I've been for many years but I've never known where to begin. I'm 36 years old and now would like to begin but now so confused as to where to begin. I have done some research online and also read through threads here on FastLane and many advise to just go out there and begin. but HOW?? I'm interested in commercial real estate. Or is residential better? I'm ready to dive into every zoning law book there is.

I would appreciate every advice. I need it. I need to know and understand what awaits me.
Let's start with -- Where do you live now? Can you qualify for a small unit (2-4 residential units) building so you can stick your toe in the water? (Yes, start with residential real estate -- it's more forgiving.) Are you handy or willing to learn? Are you willing to put in sweat equity to save yourself a buck? Do you like people, and are you will to put up with having tenants?
And here's the biggie -- are you ready to hear this? Are you in this for long haul -- in other words -- are you willing to do the work and take the guff? Like, will you wash & paint the walls, fix everything that the tenants break, cheerfully pick up any trash and mow the lawns? All while, your tenants are suck on a beer, drive a newer, flashier car than you do, sitting around watching you sweat, while they tell you how stupid you are for working so hard on you're day off? Can you take the guff? (Of course, if you are smart, their rent is paying your mortgage nut, creating a fund for your next investment and, in the meantime, getting you a bunch of tax write-offs.)
Real estate is hard work and it takes a long learning curve. It has a lot of bear traps that can crash your tender toes. And it takes money. We professional investors play Monopoly with our own real money. If it was easy, everyone would do it, and that's its real saving grace. If you can learn, and work the system, real estate is the traditional basis of most great fortunes -- especially when you get to the level where you become your own banker.
 

FlipFlops

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I'm interested in real estate development and I've been for many years but I've never known where to begin. I'm 36 years old and now would like to begin but now so confused as to where to begin. I have done some research online and also read through threads here on FastLane and many advise to just go out there and begin. but HOW?? I'm interested in commercial real estate. Or is residential better? I'm ready to dive into every zoning law book there is.

I would appreciate every advice. I need it. I need to know and understand what awaits me.

We, my wife and I, bought a house the ugliest house-nicest neighborhood we could afford. Moved in it, fixed it up over a year, turned it into a rental. Took equity out.

Bought another ugliest house, nicest neighborhood. Moved in, got plans/permits, Bulldozed it. Built two townhouses. Moved in one, kept the other as rental. Took equity out. Bought another house, bulldozed it, built three townhomes. Then built another two. Then built eight rowhouses. We have kept them all as rentals.... repeat... repeat.

The architect can help you with zoning/permits etc. There are TONS of books about being your own owner/builder and cost estimating etc. Educate yourself and go for it. Read about owner financing, creative financing, maybe give up a little equity and let someone else assume 100% of the risk.

Best advice I ever got was to look for:
Location
Expandability
And Terms
Have any two of the above your doing good, all three is a home run.
We try to keep MINIMUM of 35% equity for a cushion. 45% equity is our average.

We avoid ghettos, we look for Yuppie housing. But that is us.
You can do it, educate yourself.
 
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