How Real Estate Developers Make Money

How Much Does a Real Estate Developer Make?

One of the best ways to get rich is through making money in real estate. However, what career path to choose? Working as a real estate developer is considered as one of the most challenging careers in the real estate business, yet one of the most rewarding ones. In this blog, you will find out who is the residential real estate developer as well as the commercial real estate developer. Finally, you will be able to find the answer to your main question: "How much do they earn?" Interested? Then, keep reading!

#1 What Is Real Estate Development and Who Is the Real Estate Developer?

It is not enough to have deep pockets in order to become a real estate developer. In order not to rush, let me explain who is considered to be a real estate developer and what real estate development is.

Real estate development is thought of as the engine that drives the growth in the real estate industry. A real estate developer obtains the land upon which he/she plans to develop his/her projects in the field. Such projects might be commercial real estate development or residential real estate development. These two broad categories cover everything from retail, office and industrial real estate development to single and multi-family homes that fall into residential real estate development.

Whether you are a commercial real estate developer or residential real estate developer, you need to be well rounded. This is because the real estate business is extremely complicated and involves analytical, financial, interpersonal and other skills. This is especially true with financial skills as a real estate developer needs to make the right decisions in order to start making money in real estate and avoid financial losses. Interested to know what it takes to be a successful real estate developer? Make sure to read "7 Characteristics of a Successful Real Estate Developer."

#2 What Does a Real Estate Developer Do: The Typical Day of a Real Estate Developer

When becoming a real estate developer, you should be prepared that your first step is buying the land. That is valid for both commercial real estate development and residential real estate development. Then you should create a team of professionals in various real estate business spheres, such as architects, engineers, etc. You are also in charge of acquiring all the permits needed for the building as well as providing the funding. As a real estate developer, you do not perform the job all by yourself; instead, you act as an orchestra coordinator.

What does a typical day of a real estate developer look like? When becoming a real estate developer, you should be ready to deal with the many emergencies occurring daily. Yet, there is no such a thing as a typical day, whether you are dealing with a commercial real estate development or residential real estate development. A real estate developer is the ringleader of the circus (or multiple circuses) and is required to manage various parties that are involved in the real estate investments. For instance, you will check the architectural drawings, trade contracts, city permit approvals, layout designs, etc. Moreover, many successful real estate developers open a real estate development company under LLC in order to manage even more projects. When becoming a real estate developer, you should be prepared to not have any downtime.

#3 Why Time Is the Greatest Enemy of a Real Estate Developer

It is important to mention that time is the greatest enemy of a real estate developer or of the whole real estate development company. What is meant by that? In order to start such a project, a residential or commercial real estate developer needs a huge initial investment. In most cases, a developer applies for a real estate development loan. From day one, there is a construction loan which accumulates interest on a daily basis. A commercial or residential real estate developer loses money if he/she fails to deliver the property by a certain date. Moreover, delaying the project may negatively affect the deal with a real estate investor as he/she most probably will walk away from the purchase contract.

#4 How Much Does a Real Estate Developer Make?

When the question comes to making money in real estate, a real estate career as a developer can make you rich. Still, how much does the real estate developer make?

There is no single answer to that. Nonetheless, the real estate developer makes much more than the other parties involved in the project creation. To emphasize, the biggest part of the profit goes into the developer's pocket. Additionally, the profit a real estate developer makes may exceed $ 1,000,000.

Still, you should understand that there are many factors that influence the profit of the developer. One of the biggest factors is the type of the project, whether it is a shopping mall or a residential unit. Another thing that influences the profit is the amount of money that the developer took from a bank in the form of a mortgage loan. Finally, you should know that it might take several years to complete a single project. Consequently, the developer will not see a penny of the profit until the building is sold.

#5 Comparing How Much Others Make with a Different Real Estate Career

After you learn how to make money from real estate, comes the new question "How much does a certain real estate career make?" Below, we will explore how much does a real estate investor make as well as how much does a real estate agent make.

How Much Does a Real Estate Investor Make?

Well, how much does a real estate investor make depends on the number of properties he/she owns. Generally speaking, the real estate investor can expect an average annual rate of return on real estate investments between 8-12%. When dealing with commercial investment, a real estate investor can expect the rate of return to be around 9.5%. When dealing with residential real estate investments, the rate of return is about 10.6%. Interested to learn how much does a residential investor make? Make sure to read "How Much Can a Residential Real Estate Investor Make?"

How Much Does a Real Estate Agent Make?

There is no single answer to the question: "How much does a real estate agent make?" This is because it depends on the experience he/she has, the real estate investment network built, etc. First-year real estate agents earn little as they are still struggling with building a client portfolio. However, as the time passes, you gain the experience and you build your own network. Thus, you may end up with the top agents and start making over $100,000 a year. Curious how to be the best real estate agent in your location? Make sure to read "How to Become the Best Real Estate Agent in Your Location."

To learn more about all aspects of a real estate development company, continue reading our blog.