If you are interested in becoming an entrepreneur, we feel it’s important that you are prepared to take risks. While entrepreneurship and risk-taking seem synonymous, we believe it’s more about how to take calculated risks and recognizing when to seize the moment. Successful real estate developers are skilled at evaluating risk and reward, but very few of them jump blindly into any investment. They are bold, smart, hard-working, shrewd individuals who value preparation and know when to take action. To that end, we feel there are many things that you can learn from real-estate developers that can help you hone your entrepreneurial skills.
A successful real-estate developer will utilize a sophisticated financing structure with the various types of capital arranged in a way that dictates the order of claims to investment returns. A developer may also syndicate a portion of this capital, which means divvying up some of the equity among a group of investors who are informed about the investment terms, project timeline, and return projections. The organized nature of this process allows the investor to raise funds efficiently.
Entrepreneurs should also look for ways to raise capital in a structured way while also making it clear to investors how you intend to earn returns. Creating a haphazard plan or failing to properly communicate with investors is a recipe for failure.
Real estate developers know that networking is one of the most important steps in obtaining financial backers. They are some of the best networkers we know. After all, investing isn’t just about the opportunity to make money. It is also about backing someone you trust. Developers can build a reputation over time as they build a portfolio of completed projects to prove their worth. This portfolio demonstrates prior success, thereby proving that they are not simply taking risky leaps of faith with their developments. Rather, they were able to successfully examine the data and trends to make sound development choices.
The same concepts hold true for entrepreneurs. You will need to find ways to show potential investors that you can back your claims. The best way to do this is to highlight your past performance. By keeping your network informed and engaged, they will be more motivated to be a partner in your success.
Before purchasing a property and committing their time and money to the investment, a real-estate developer will conduct what is known as a feasibility study. A feasibility study involves researching the legal, financial, economic, and technological factors involved with making the investment. It also involves analyzing the location, market, competition, usage concept, and risk involved with the project.
The same due diligence should be followed by an entrepreneur. Rather than dive headfirst into product development, the entrepreneur should analyze the risk as well as the market forces that will impact the success – or lack thereof – of the project.
Real-estate developers invest a great deal of time in the planning process. This includes scouting and purchasing land, developing a team, and obtaining the necessary licensing and permissions. Since real-estate developers are often juggling multiple things at one time, proper planning and organization are essential to ensure the work is done properly.
As an entrepreneur, you should follow this same path. Develop a plan and make revisions along the way as you network, raise capital, and explore the feasibility of your plan. Even an informal outline will help to ensure you stay on track with your business plans. These tools of the trade used by real estate developers will be sure to help you along the way as you pursue your entrepreneurial goals.