10 Steps to Achieving Success in Multifamily Development 10 Steps to Achieving Success in Multifamily Development | Winterspring Capital

10 Steps to Achieving Success in Multifamily Development

10 Steps to Achieving Success in Multifamily Development

10 Steps to Achieving Success in Multifamily Development

Don't Get Overwhelmed, We've Been There Before

Getting yourself into the world of multifamily development can seem daunting when you’re new to the industry..

It seems like most people with success in the field had some kind of connection or advantage that you might not be able to replicate. 

Not to mention… the volume of information and variety of moving parts could cover years of traditional schooling!

The truth is, it sometimes still feels daunting even after years of experience. 

Make Sure You Do This ONE Thing

One thing you should do (something we’ve adopted as a habit as a team) is to create lists of goals or priorities. These are actionable items that will move your business forward.

What are the 20% of inputs that yield 80% of the outputs? These are good questions to ask yourself as you write these lists.

A good approach with these kinds of lists is to keep them general at first and then focus in on the details for each specific item. 

You can then create sub-tasks for each step in a logical progression.  Using apps like Google calendar in combination with this method will allow you to create a streamlined system that you can follow every day to push targeted energy towards your goals.

In this article, I’m going to provide my own general list of steps, goals, and priorities born out of our years of development experience, so you can immediately implement them in your business:

1. Study Key Real Estate Metrics:

10 Steps to Achieving Success in Multifamily Development

Before you can do anything else, you need to be capable of analyzing deals.  In our 10 Key Metrics Real Estate Investors Care About article, we took a more in depth look at some of these metrics, how they are calculated, and why they matter. 

Some of these key metrics that you definitely need to wrap your head around early on include cap rate, net operating income, cash on cash return, and the debt service coverage ratioCheck out the article for a more in depth explanation of each.

 

2. Study the Basics of Construction:

10 Steps to Achieving Success in Multifamily Development

The truth is that there are general partners that bring very large development deals together with very little knowledge of construction.

While it may be possible, in our opinion it’s ridiculous to be at the helm of a big development project and have little to no knowledge of the working parts that go in to construction.

A great place to start is to look at our sample construction schedule and budget, which includes all the categories for a construction project, as well as our sample construction timeline. Click here to download it.

3. Identify and Analyze Markets:

10 Steps to Achieving Success in Multifamily Development

Step one here is to figure out what markets you want to build in. If you’re inexperienced and starting small, it’s advisable to build somewhere within driving distance of your project.

Ideally you will have a project manager and supervisor working together with your general contractor, but this might not be possible when you’re first starting out and you will need to be on-site yourself for much of the construction.

Eventually, you will want to learn how to run a project even from a distance, and if you feel comfortable based on your current experience, your options of where to build increase exponentially.

No matter what, you want to be building in strong markets where the rental rates or sales rates significantly exceed the cost of construction, associated soft costs, and the acquisition costs for land or infill sites.

Our Demand Generators for Real Estate Explained article gives a general overview of the forces at work that make markets desirable and our Five Tips for Targeting High Density Zoning Areas for Long-Term Real Estate Investing article explains how to narrow your focus on those zones best suited for your purpose as a multifamily developer.

4. Connect With Brokers in Your Area:

10 Steps to Achieving Success in Multifamily Development

Research the top brokers in your area and create a list of all of them.

Ideally, you will want to use a CRM (customer relationship management) system, which will allow you to input the contact information of each broker and set automated follow ups so you can stay in consistent contact.

Find brokers that deal with developers or find hard working or ambitious brokers that you can teach to find the deals you like.

When speaking with high level brokers, make sure you have a thorough understanding of the key metrics we discussed earlier and a decent grasp on the market the broker works in.

Brokers will take you much more seriously when you “speak their language.”

They don’t want to waste their time with people who don’t really know what they’re looking for and potentially will not actually be able to purchase any of their offerings.

5. Create Off-Market Prospecting Systems:

10 Steps to Achieving Success in Multifamily Development

In addition to your broker network, you’ll want to build systems that can allow you to source deals off-market.

In our Understanding GIS, Assessor Database, and Zoning Viewers for Real Estate Investment and Development Explained article, we went through some of the best ways to get information on off market properties.

Once you’ve read through that article and have built up a list of areas or specific properties you want to target, you can load all of that information into your CRM to stay in touch with the owners.

It’s best to have multiple points of contact, so look into direct mailer services (we like Open Letter Marketing), conduct cold calls, and even knock on doors to keep yourself at the top of the property owners’ minds whenever they decide to sell.

You might be sending letters and speaking on the phone with a prospect for years before anything comes to fruition, so be patient and consistent.

6. Constantly Network:

10 Steps to Achieving Success in Multifamily Development

Take every moment of time you can to dedicate to reaching out to, meeting, and networking with new people in the real estate industry.

These are the people that will someday bring you new deals, invest in your deals or find you investors, and connect you to key members of your team.

You’ll never know what benefits a new introduction can bring until you put yourself out there and let people know what your company does, deals you are looking for, and investment opportunities you have available.

To give you some examples, we’ve sourced off market development projects from someone we met in a Staples print center 3 years previously.

Our friends that run a development software service introduced us to our zoning consultant that has helped us get tricky deals entitled and permits pulled more quickly.

You can’t predict what benefits your network could bring you.

Just trust that benefits will inevitably come if you’re networking with the right people and presenting yourself and your company well.

7. Analyze Deals:

10 Steps to Achieving Success in Multifamily Development

In our The Importance of Comps in Real Estate Development Explained article we explained how to use comparable properties to analyze the deals that come from your broker network and your off market prospecting efforts.

Everything springs from the rental or sales rate per square foot or per unit of comparable properties within the same market as your deal, as well as the cost per square foot of the development project.

From there, you can go deeper into the key metrics we mentioned previously that you will need to properly compare deals to one another, qualify for lending, and attract investor capital.

8. Assemble Your Team:

10 Steps to Achieving Success in Multifamily Development

You’ll need to assemble a team of professionals that work together to design and build your project.

Your team will consist of your architect, landscape architect (if applicable), interior designer, structural engineer, civil engineer, geotechnical engineer, fire protection engineer, mechanical engineer, conservation consultant (if applicable), clerk-of-the-works, general contractor, zoning attorney, transaction attorney, securities attorney, and accountant, just to name a few.

Spend time getting familiar with all of the professionals you will need to hire and ask for references from contractors, brokers, and other industry professionals to find well-regarded businesses in your market that can fill these roles for you.

9. Create Marketing Systems:

10 Steps to Achieving Success in Multifamily Development

You want to make sure you have good systems in place that will allow you to achieve the highest rental rates and sales prices for your market once you complete your project.

If your building is well constructed and aesthetically pleasing, it’s all down to proper marketing to make sure you’re getting the best return.

Work with experienced brokers that have years of experience working within your market and with projects like your own.

If you run your own brokerage, which is a great way to cut costs and add additional revenue streams to your business, make sure to always stay on the cutting edge of new technologies and marketing techniques for real estate.

10. Find Financing and Integrate investor capital:

10 Steps to Achieving Success in Multifamily Development

You can’t build anything without the funds.

Look at what banks are financing construction projects in your area.

You can do this by keeping tabs on new construction projects in your market and then pulling information on the construction loan note from the assessor’s database, MLS, or from the deed database for your municipality.

This will then give you a list of lenders that you can reach out to for your project. If you’re just starting out or trying to scale up to larger projects, private “hard money” lenders are a great option.

You can usually find them on social media and through referrals from other developers.

If your company maintains an active presence on social media, they’ll often come to you and introduce their services to you.

While many smaller developers will fund the equity component from their own capital, large development deals will almost always also include outside equity investors.

We explained the legal mechanics of real estate syndication in our Private Placement Memorandum (PPM) Operating Agreement, and Rule 506 For Real Estate Syndication Explained article, which is a great place to start if you’re new to working with investors.

Through networking and your online presence, you can pull together funds from your investor network in order to purchase larger deals.

Don't Get Overwhelmed, We've Been There Before

Getting yourself into the world of multifamily development can seem daunting when you’re new to the industry..

It seems like most people with success in the field had some kind of connection or advantage that you might not be able to replicate. 

Not to mention… the volume of information and variety of moving parts could cover years of traditional schooling!

The truth is, it sometimes still feels daunting even after years of experience. 

Make Sure You Do This ONE Thing

One thing you should do (something we’ve adopted as a habit as a team) is to create lists of goals or priorities. These are actionable items that will move your business forward.

What are the 20% of inputs that yield 80% of the outputs? These are good questions to ask yourself as you write these lists.

A good approach with these kinds of lists is to keep them general at first and then focus in on the details for each specific item. 

You can then create sub-tasks for each step in a logical progression.  Using apps like Google calendar in combination with this method will allow you to create a streamlined system that you can follow every day to push targeted energy towards your goals.

In this article, I’m going to provide my own general list of steps, goals, and priorities born out of our years of development experience, so you can immediately implement them in your business:

1. Study Key Real Estate Metrics:

10 Steps to Achieving Success in Multifamily Development

Before you can do anything else, you need to be capable of analyzing deals.  In our 10 Key Metrics Real Estate Investors Care About article, we took a more in depth look at some of these metrics, how they are calculated, and why they matter. 

Some of these key metrics that you definitely need to wrap your head around early on include cap rate, net operating income, cash on cash return, and the debt service coverage ratioCheck out the article for a more in depth explanation of each.

 

2. Study the Basics of Construction:

10 Steps to Achieving Success in Multifamily Development

The truth is that there are general partners that bring very large development deals together with very little knowledge of construction.

While it may be possible, in our opinion it’s ridiculous to be at the helm of a big development project and have little to no knowledge of the working parts that go in to construction.

A great place to start is to look at our sample construction schedule and budget, which includes all the categories for a construction project, as well as our sample construction timeline. Click here to download our Investor Toolkit.

3. Identify and Analyze Markets:

10 Steps to Achieving Success in Multifamily Development

Step one here is to figure out what markets you want to build in. If you’re inexperienced and starting small, it’s advisable to build somewhere within driving distance of your project.

Ideally you will have a project manager and supervisor working together with your general contractor, but this might not be possible when you’re first starting out and you will need to be on-site yourself for much of the construction.

Eventually, you will want to learn how to run a project even from a distance, and if you feel comfortable based on your current experience, your options of where to build increase exponentially.

No matter what, you want to be building in strong markets where the rental rates or sales rates significantly exceed the cost of construction, associated soft costs, and the acquisition costs for land or infill sites.

Our Demand Generators for Real Estate Explained gives a general overview of the forces at work that make markets desirable and our Five Tips for Targeting High Density Zoning Areas for Long-Term Real Estate Investing article explains how to narrow your focus on those zones best suited for your purpose as a multifamily developer.

4. Connect With Brokers in Your Area:

10 Steps to Achieving Success in Multifamily Development

Research the top brokers in your area and create a list of all of them.

Ideally, you will want to use a CRM (customer relationship management) system, which will allow you to input the contact information of each broker and set automated follow ups so you can stay in consistent contact.

Find brokers that deal with developers or find hard working or ambitious brokers that you can teach to find the deals you like.

When speaking with high level brokers, make sure you have a thorough understanding of the key metrics we discussed earlier and a decent grasp on the market the broker works in.

Brokers will take you much more seriously when you “speak their language.”

They don’t want to waste their time with people who don’t really know what they’re looking for and potentially will not actually be able to purchase any of their offerings.

5. Create Off-Market Prospecting Systems:

10 Steps to Achieving Success in Multifamily Development

In addition to your broker network, you’ll want to build systems that can allow you to source deals off-market.

In our Understanding GIS, Assessor Database, and Zoning Viewers for Real Estate Investment and Development Explained article, we went through some of the best ways to get information on off market properties.

Once you’ve read through that article and have built up a list of areas or specific properties you want to target, you can load all of that information into your CRM to stay in touch with the owners.

It’s best to have multiple points of contact, so look into direct mailer services (we like Open Letter Marketing), conduct cold calls, and even knock on doors to keep yourself at the top of the property owners’ minds whenever they decide to sell.

You might be sending letters and speaking on the phone with a prospect for years before anything comes to fruition, so be patient and consistent.

6. Constantly Network:

10 Steps to Achieving Success in Multifamily Development

Take every moment of time you can to dedicate to reaching out to, meeting, and networking with new people in the real estate industry.

These are the people that will someday bring you new deals, invest in your deals or find you investors, and connect you to key members of your team.

You’ll never know what benefits a new introduction can bring until you put yourself out there and let people know what your company does, deals you are looking for, and investment opportunities you have available.

To give you some examples, we’ve sourced off market development projects from someone we met in a Staples print center 3 years previously.

Our friends that run a development software service introduced us to our zoning consultant that has helped us get tricky deals entitled and permits pulled more quickly.

You can’t predict what benefits your network could bring you.

Just trust that benefits will inevitably come if you’re networking with the right people and presenting yourself and your company well.

7. Analyze Deals:

10 Steps to Achieving Success in Multifamily Development

In our The Importance of Comps in Real Estate Development Explained article we explained how to use comparable properties to analyze the deals that come from your broker network and your off market prospecting efforts.

Everything springs from the rental or sales rate per square foot or per unit of comparable properties within the same market as your deal, as well as the cost per square foot of the development project.

From there, you can go deeper into the key metrics we mentioned previously that you will need to properly compare deals to one another, qualify for lending, and attract investor capital.

8. Assemble Your Team:

10 Steps to Achieving Success in Multifamily Development

You’ll need to assemble a team of professionals that work together to design and build your project.

Your team will consist of your architect, landscape architect (if applicable), interior designer, structural engineer, civil engineer, geotechnical engineer, fire protection engineer, mechanical engineer, conservation consultant (if applicable), clerk-of-the-works, general contractor, zoning attorney, transaction attorney, securities attorney, and accountant, just to name a few.

Spend time getting familiar with all of the professionals you will need to hire and ask for references from contractors, brokers, and other industry professionals to find well-regarded businesses in your market that can fill these roles for you.

9. Create Marketing Systems:

10 Steps to Achieving Success in Multifamily Development

You want to make sure you have good systems in place that will allow you to achieve the highest rental rates and sales prices for your market once you complete your project.

If your building is well constructed and aesthetically pleasing, it’s all down to proper marketing to make sure you’re getting the best return.

Work with experienced brokers that have years of experience working within your market and with projects like your own.

If you run your own brokerage, which is a great way to cut costs and add additional revenue streams to your business, make sure to always stay on the cutting edge of new technologies and marketing techniques for real estate.

10. Find Financing and Integrate investor capital:

10 Steps to Achieving Success in Multifamily Development

You can’t build anything without the funds.

Look at what banks are financing construction projects in your area.

You can do this by keeping tabs on new construction projects in your market and then pulling information on the construction loan note from the assessor’s database, MLS, or from the deed database for your municipality.

This will then give you a list of lenders that you can reach out to for your project. If you’re just starting out or trying to scale up to larger projects, private “hard money” lenders are a great option.

You can usually find them on social media and through referrals from other developers.

If your company maintains an active presence on social media, they’ll often come to you and introduce their services to you.

While many smaller developers will fund the equity component from their own capital, large development deals will almost always also include outside equity investors.

We explained the legal mechanics of real estate syndication in our Private Placement Memorandum (PPM) Operating Agreement, and Rule 506 For Real Estate Syndication Explained article, which is a great place to start if you’re new to working with investors.

Through networking and your online presence, you can pull together funds from your investor network in order to purchase larger deals.

Invest with Winterspring

10 Steps to Achieving Success in Multifamily Development
10 Steps to Achieving Success in Multifamily Development
10 Steps to Achieving Success in Multifamily Development
10 Steps to Achieving Success in Multifamily Development