What Makes A Successful Property Developer?
There are some jobs or careers where the qualifications one requires are pretty obvious. Dentistry, for example. Not everyone’s cup of tea, perhaps. But you’d be pretty sure that if the urge inexplicably came upon you, you probably wouldn’t be allowed to clear out your back room, buy a swanky chair and a set of drills off eBay, and advertise your dentistry services to all and sundry. You’d be pretty sure that there’d be a little education and training involved, and possibly some sort of diploma you’d need to stick on your wall before you’d be allowed to say, ‘open wide, this isn’t going to hurt much.’
If you’re interested, most dentists undergo five years’ study at dental school and then have a further two years of supervised practice before they’re qualified. In fact, many professions have a long training lead time before you can get started.
Back in the Middle Ages, when I became a chartered structural engineer, it required nine years’ training to become qualified. Of course, there are many other jobs out there that require less time to become adept in the skills needed, and some can be done in almost no time at all. So, where on this training spectrum lies the humble property developer? Exactly what skills do you need to become successful at it, even if you’re only doing it in your spare time and tackling relatively small projects? Well, I’m glad you asked. Let me try and shed some light.
Property development has to be one of the world’s more highly leveraged jobs, but this only applies if you approach it correctly. The trick is to play the role of a CEO rather than that of a Project Manager. A Project Manager looks to manage the project personally (the clue’s in the title), which involves ensuring that all professionals, contractors, and tradespeople do what they’re supposed to do. Lots of site visits and the occasional banging of heads. Landlords regularly play this (often stressful) role when they refurb or convert their rental properties. I’ve lost count of the number of students I teach whose initial ambition was to become their own Project Manager. Let me tell you; you really don’t want to be doing this. Instead, you want to be the CEO who hires a Project Manager to manage your projects for you. The PM will then be your eyes and ears on the project and will report back to you. More importantly, they’ll have a lot more experience than you and will be better at it. Sorry, but there it is. And the good news is that even small-scale development projects can readily afford the cost of hiring a good Project Manager.
You’ll probably already have gathered that, as a developer, you won’t be drawing up the architectural plans or laying any bricks personally. Instead, you’ll be hiring an architect and employing a main contractor who’ll take care of this. In fact, as a developer, you’ll probably have a couple of dozen different professionals working on your project. This is where the leverage comes in. Even though each of these people may have decades of experience in their respective careers, all you need to do is pay a relatively modest fee to hire them to work on your project. You’re simply creating a team of professionals to work under your Project Manager, with you sitting at the top of the tree as the CEO. Now, look at you! Suddenly, you’re heading up a team of professionals with hundreds of years of experience between them and who have completed hundreds of development projects.
And the best part is that you don’t have to shell out for their services personally; their fees will be paid for by the development finance.
Now, while this picture looks quite rosy from a distance, you probably think there’s a fairly large elephant in the room. Because the truth is, while your professional team may have lots of experience in development, you feel like the odd one out since you’ve never done a single day’s property developing in your life. Ok, it’s time for a quick reality check to calm those newbie nerves.
Let’s think about cruises for a moment, not that you’ll have been on many of those recently. You may have noticed that Richard Branson has recently launched his first cruise line, and you won’t be surprised to learn it’s called Virgin Voyages. But he didn’t start this venture, having spent thirty years in the cruise line industry, rising from cabin boy to captain. Instead, he’s simply an entrepreneur who saw a great opportunity and who used his existing CEO skills to pull together a team that already has all of the experience necessary to make it a success. Did he attend that first board meeting thinking, ‘I hope no one asks me what the front end of a boat is called or what it costs to build a cruise liner?’ Probably not. He has a team of people sitting around the table that can answer those questions for him. But what he does have are the skills necessary to see an opportunity and build a team capable of taking advantage of it. And, of course, you wouldn’t bet against him succeeding.
Now, your role as a small-scale property developer is of the same mould. Nothing quite as grand as running a cruise line, but the principle is the same. You’ll be playing the role of Richard Branson in your (much smaller) property development business, and your extended team will be on hand to deal with the details and the technical stuff.
So what exactly will you, the developer, be doing? Well, at a high level, your job breaks down into several key roles:
- You’ll need to establish your business, strategy, and brand, and decide what type of development you’re going to tackle.
- You’ll have to recruit your team of professionals, including architects, solicitors, project managers, structural engineers, etc.
- You’ll need to be able to find a supply of good quality, profitable deals. These will need to be analysed to sort the wheat from the chaff and decide which ones are worth pursuing.
- You’ll be arranging the finance for your first project, working with both commercial lenders and private investors.
This is all well and good, but what skills do you need to be a property developer? Surely you can’t expect to earn the sort of money developers make without having any talent or knowledge whatsoever? Well, I’ve been training and working with developers for nearly 40 years, and here, in my opinion, are the essential skills that you need to do the job well.
1. Organisational skills
Guess how far off the starting line Virgin Voyages would have got without Mr. Branson’s involvement? Well, your property development business is the same. It won’t happen unless you make it so. And this requires you to be highly organised.
You also need to be systemised and make sure you establish processes for each part of your business. They take effort and foresight to set up, but they pay big dividends and stop your business from degenerating into a shambles.
2. People skills
Development is fundamentally a people business. Not only will you be working with a team of professionals, but you’ll also be wooing estate agents, lenders, and private investors. This requires the ability to create and build rapport. And, of course, development projects always have a few bumps in the road, so you’ll need to be able to make sure you get to the end with all of your critical relationships intact, ready to go again.
3. Management Skills
Property development is a business, and you need to operate it as such. This means deploying management skills to run your business and being highly disciplined. You’ll also need to stay on top of cash flow, as even profitable deals could fall into the red on their journey unless you manage things effectively.
4. Decision-making skills
Any decision is often better than no decision, and in development, you’ll have a team of professionals to advise you. The problem can arise where the developer needs to make a difficult call, and they dither, hoping some silver bullet solution might suddenly arrive. This dallying has scuppered many a project, frustrating the contractor who can’t get on with things until a decision is made. So when the ball is in your court, make a decision quickly and move on. In development, time is usually money.
5. Hard work
Once you’re up and running, development can be a job you do in your spare time. But you’ll need to put in some hard graft to get started. You’ll also need to be persistent. Great deals don’t grow on trees, and there’s no guarantee you’ll find one quickly. The good news is that this frightens off most of the competition, so if you know what you’re doing and you stick with it, you’re likely to be successful.
6. Education
Your property development education is the glue that holds all of the above together. Can you avoid making any expensive mistakes without getting training? It’s theoretically possible, but then it’s also possible to jump out of a plane without training.
The other thing that education gives you is the ability to see opportunities that other developers can’t see. And you’ll want that edge so you can get the best possible deals.
7. Determination
It’s easy to get disheartened. Great deals can be difficult to find, and projects rarely go entirely as planned. The spoils go to the developer who keeps going. But your first project will inevitably be your most challenging, and the journey gets easier as you build your experience and reputation.
So there we have it; the seven attributes of highly successful property developers. One of property development’s key attractions is its accessibility since, apart from your property education, the core skills you require are not specific to the industry. Many people have these skills and already use them in their careers, day in, day out.
One could even argue that parenting requires a broadly similar set of skills, albeit it brings very different rewards. The point is, property development is not a difficult market to enter, and if you do it well, just like parenting, it can produce life-changing results.