Can Developers Make Money

It’s an interesting question.

Can Developers Make MoneyI once worked for a jeweler who told me developers never have any money. It’s a waste to spend time trying to sell them something they can’t afford.

And he was right in a way. I never made a major sale to any contractor/developer in the jewelry business and neither did my old friend.

It’s a question of what are they willing to buy and it’s usually business opportunities that involve acquiring property and turning it into something others will buy.

It’s all about what they want to be doing…what kinds of investments they want to make.

When you get right down to the reality of this whole discussion developers have the right idea. They are gambling on a large investment that may pay off better than any piece of jewelry. Land and buildings are relatively permanent, they don’t usually decline in value (since the real estate crash, anyway), they can be improved and rebuilt to have more value and they can be great investments…IF you can realize the vision in the right place, at the right time, for the right price.

Can Developers Make Money

And of course, that is where it gets frustrating. Choosing the right project can be both complicated and difficult. And your timing could never pan out for the project…let alone the money.

But developers also tend to be short of ready cash to make deals they want to make.

They end up having to borrow money to buy the property, then they have to find people or banks willing to invest in the project, the project has to be constructed and then the units…whatever they might be…have to sell to an end buyer. A conventional commercial loan may not be an option for many contractors either due to insufficient time to close or less than great credit because of a previous deal that slowed their payment history or worse. They end up with a commercial bridge loan, which is more expensive than conventional financing putting more pressure on the project’s economics. What is a commercial bridge loan? Simply put, it’s usually an interest only commercial loan for two or three years to “bridge the gap” until they can secure conventional financing.

Can Developers Make MoneySometimes developers, even the good ones (like Donald Trump) get delayed into bankruptcy by conditions not under their control.

For developers who are not working in hot real estate markets it may be difficult or impossible for them to find financing of any kind. This urge to do something, something that is important and visible is the wish of most developers.

We have spoken with many who had good ideas for everything from beach or mountain resorts, cluster home communities, shopping venues, farms, green communities, apartments, condos, retirement villages, house flippers, etc.

It brings us to an inescapable conclusion.

You need to have some money of your own to succeed in the building/development business.

No lender will take a chance if the borrower is not seriously invested…financially, not just emotionally…in a project.

Lenders want to have the prospect of making a lot of money relatively quickly before they invest in your treasured dream. They live to make money, not fulfill dreams. They will look at reality and possibly shoot your dream down in the process.

Another risk businesses experience every day is that the project may end up the property of the investors, not the original developer. Inventors rarely reap the profit of their inventions. Minority stock holders have little, if any control and the money men generally rule and hold the majority position in any company or project.

Reality bites…again.

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