As a property educator, it goes without saying that I'm in favour of learning the skills needed to become a property developer from me!
Reality is, there are multiple ways to learn how to become a property developer. I regularly hear people say there's no need to shell out money to learn because you can work it out for yourself.
And while it might feel good not to pay out a lump of cash for education upfront, chances are you'll still pay for that education in other ways.
So let's take a look at the different ways you can learn to become a property developer, and what each one costs.
Winging It
This covers the "working it out for yourself" approach. Essentially you don't pay to do any type of course, you just find a deal and work it out along the way.
For some types of deals, you can potentially outsource most of the work to people who know what they're doing. That's great in terms of outcome, but how much do you actually learn along the way?
Even worse, if you haven't learnt how to do your due diligence and feasibility for the project, the chances of making a loss are much higher.
This is where the cost kicks in. Sure, you saved yourself dollars upfront by not paying for any education, but if lack of knowledge means you then lose money in the deal, was it worth it? All you've done is move the cost from the start to the finish, and potentially paid a lot more.
Worse, you've incurred costs in other ways. Lack of knowledge often means a deal will take longer to complete, so you lose a lot of time. That leads to an opportunity cost because you can't use that money to take advantage of other opportunities.
And so far I've still assumed the deal is relatively straightforward. What if you make mistakes along the way because you didn't know any better? What are they going to cost you?
Finally, there are costs you can't even measure or might not even know exist. What if you could potentially have put an extra dwelling on the site, but you didn't know that might be possible? How much profit would that cost you?
There are plenty of people who've become property developers at the School of Hard Knocks (also known as experience) but knowing what to do can save you a lot of time, money and mistakes.
Someone Else's Deal
Okay, you're thinking, so doing it myself might not be such a good idea. How about I invest in someone else's deal, then shadow them through the process?
Again, this is another popular suggestion made to people wanting to become property developers. At least in this scenario you've got your training wheels on and can watch someone experienced in action, which eliminates the risk of you making mistakes in your own project through ignorance.
It might not involve a fee upfront, and although you're investing a lump of cash, if it's a good deal you'll get that back plus more at the end. So it's almost like being paid to learn, right?
Perhaps, but there's a couple of issues with this approach if you're still a newbie. How do you know it's a good deal? As I've said many times, I've never seen an Information Memorandum for a deal that shows a loss. Do you know how to cross check the numbers and make sure they're realistic?
Even more to the point, do you have the skills to do your due diligence on the developer? Being really good at convincing people to put money into a deal doesn't automatically mean someone is a good developer. There are snake oil salesmen lurking anywhere money can be made.
Assuming you've found an experienced developer with a good deal, there's a few more things to think about. You may invest with a view to shadowing the developer, but how much of the process will you see?
It's highly unlikely you'll be spending every minute of the day with the developer, and a regular meeting, even weekly, won't show you everything that's going on.
Worse, you only see the bit of the project that happens after you've invested your money. If you come in once the site has been found and plans are underway, you've missed all the preliminary work and due diligence on the project. Learning how to run the deal is great, but it's not the whole deal.
Finally, does the deal you've invested in match your own strategy? This is a particularly important question if you don't even know what your strategy is yet and don't know how to choose. You might spend a lot of time shadowing a deal and learning skills only to find they don't translate to projects you want to do in the future.
Joint Ventures
This is a great way to get more involved in a deal and so improve your learning opportunities. Having said that, it's very important that your partner is someone knowledgeable and experienced.
Make sure your agreement clearly sets out each person's responsibilities, with clarity around what information needs to be shared and when, so you maximise your learning.
Again, make sure the joint venture deal is the type of project you're planning to do on your own down the track, to ensure the experience you gain is relevant.
There's still the same issues around determining whether or not the deal and your JV partner are sound, and if you have no experience yourself, that can be hard to determine.
Keep in mind that most joint ventures are done on a profit share basis, which is great when things go well as you can potentially earn more profit. But if things go really wrong you're potentially responsible for your share of the loss, too. Ouch.
Tertiary Education
Tertiary institutions now have a range of courses you can do in the property development space. I've never undertaken one of these courses, but I know people who have, so I can speak to what it's going to cost you.
HECS fees are certainly a cost, but the main issue with courses like this is that they're theory-based. Which might sound great, but practical experience beats theory every day of the week as a property developer.
Look, if your plan is to get a job in the property industry in some capacity while building up to becoming a full-time property developer, then maybe this is an option for you. Mostly, though, these courses churn out graduates who work for property developers.
The cost here is time. Do you want to spend a few years of your life getting a qualification that won't help you much as a property developer? This hurts even more if you're also racking up a substantial HECS debt at the same time.
Property Development Education
The final category is the one my own course, Property Development Formula, falls into. This is where someone with a lot of experience in the property development space puts together a course to share all their hard-won knowledge and experience.
Yes, it's going to cost you money upfront. But a good course will teach you the whole process of property development from start to finish. This means you won't miss any pieces of the puzzle.
The upside of this is that in the long run it saves you time and money because you can accelerate the learning process and avoid making major mistakes.
The important thing to remember here is you need to find an educator who is in alignment with your chosen strategy. There's no point getting education from a renovations specialist if you want to be a property developer!
Okay, I admit I'm biased, but it doesn't matter how you break it down, at some point you're going to pay for the education you need to become a property developer.
It's your choice whether you pay money upfront or later, and how much time you want to spend reaching the level of success you want to achieve.
As a reward for reading this article, please listen to my FREE 7 Step Formula course. It won't teach you how to become a property developer, but it's a great way to understand all the elements that are involved in that journey. It will either inspire you to move forward on that path, or help you realise it's not for you. Enjoy!
Reality is, there are multiple ways to learn how to become a property developer. I regularly hear people say there's no need to shell out money to learn because you can work it out for yourself.
And while it might feel good not to pay out a lump of cash for education upfront, chances are you'll still pay for that education in other ways.
So let's take a look at the different ways you can learn to become a property developer, and what each one costs.
Winging It
This covers the "working it out for yourself" approach. Essentially you don't pay to do any type of course, you just find a deal and work it out along the way.
For some types of deals, you can potentially outsource most of the work to people who know what they're doing. That's great in terms of outcome, but how much do you actually learn along the way?
Even worse, if you haven't learnt how to do your due diligence and feasibility for the project, the chances of making a loss are much higher.
This is where the cost kicks in. Sure, you saved yourself dollars upfront by not paying for any education, but if lack of knowledge means you then lose money in the deal, was it worth it? All you've done is move the cost from the start to the finish, and potentially paid a lot more.
Worse, you've incurred costs in other ways. Lack of knowledge often means a deal will take longer to complete, so you lose a lot of time. That leads to an opportunity cost because you can't use that money to take advantage of other opportunities.
And so far I've still assumed the deal is relatively straightforward. What if you make mistakes along the way because you didn't know any better? What are they going to cost you?
Finally, there are costs you can't even measure or might not even know exist. What if you could potentially have put an extra dwelling on the site, but you didn't know that might be possible? How much profit would that cost you?
There are plenty of people who've become property developers at the School of Hard Knocks (also known as experience) but knowing what to do can save you a lot of time, money and mistakes.
Someone Else's Deal
Okay, you're thinking, so doing it myself might not be such a good idea. How about I invest in someone else's deal, then shadow them through the process?Again, this is another popular suggestion made to people wanting to become property developers. At least in this scenario you've got your training wheels on and can watch someone experienced in action, which eliminates the risk of you making mistakes in your own project through ignorance.
It might not involve a fee upfront, and although you're investing a lump of cash, if it's a good deal you'll get that back plus more at the end. So it's almost like being paid to learn, right?
Perhaps, but there's a couple of issues with this approach if you're still a newbie. How do you know it's a good deal? As I've said many times, I've never seen an Information Memorandum for a deal that shows a loss. Do you know how to cross check the numbers and make sure they're realistic?
Even more to the point, do you have the skills to do your due diligence on the developer? Being really good at convincing people to put money into a deal doesn't automatically mean someone is a good developer. There are snake oil salesmen lurking anywhere money can be made.
Assuming you've found an experienced developer with a good deal, there's a few more things to think about. You may invest with a view to shadowing the developer, but how much of the process will you see?
It's highly unlikely you'll be spending every minute of the day with the developer, and a regular meeting, even weekly, won't show you everything that's going on.
Worse, you only see the bit of the project that happens after you've invested your money. If you come in once the site has been found and plans are underway, you've missed all the preliminary work and due diligence on the project. Learning how to run the deal is great, but it's not the whole deal.
Finally, does the deal you've invested in match your own strategy? This is a particularly important question if you don't even know what your strategy is yet and don't know how to choose. You might spend a lot of time shadowing a deal and learning skills only to find they don't translate to projects you want to do in the future.
Joint VenturesThis is a great way to get more involved in a deal and so improve your learning opportunities. Having said that, it's very important that your partner is someone knowledgeable and experienced.
Make sure your agreement clearly sets out each person's responsibilities, with clarity around what information needs to be shared and when, so you maximise your learning.
Again, make sure the joint venture deal is the type of project you're planning to do on your own down the track, to ensure the experience you gain is relevant.
There's still the same issues around determining whether or not the deal and your JV partner are sound, and if you have no experience yourself, that can be hard to determine.
Keep in mind that most joint ventures are done on a profit share basis, which is great when things go well as you can potentially earn more profit. But if things go really wrong you're potentially responsible for your share of the loss, too. Ouch.
Tertiary Education
Tertiary institutions now have a range of courses you can do in the property development space. I've never undertaken one of these courses, but I know people who have, so I can speak to what it's going to cost you.
HECS fees are certainly a cost, but the main issue with courses like this is that they're theory-based. Which might sound great, but practical experience beats theory every day of the week as a property developer.
Look, if your plan is to get a job in the property industry in some capacity while building up to becoming a full-time property developer, then maybe this is an option for you. Mostly, though, these courses churn out graduates who work for property developers.
The cost here is time. Do you want to spend a few years of your life getting a qualification that won't help you much as a property developer? This hurts even more if you're also racking up a substantial HECS debt at the same time.
Property Development Education
The final category is the one my own course, Property Development Formula, falls into. This is where someone with a lot of experience in the property development space puts together a course to share all their hard-won knowledge and experience.
Yes, it's going to cost you money upfront. But a good course will teach you the whole process of property development from start to finish. This means you won't miss any pieces of the puzzle.
The upside of this is that in the long run it saves you time and money because you can accelerate the learning process and avoid making major mistakes.
The important thing to remember here is you need to find an educator who is in alignment with your chosen strategy. There's no point getting education from a renovations specialist if you want to be a property developer!
Okay, I admit I'm biased, but it doesn't matter how you break it down, at some point you're going to pay for the education you need to become a property developer.
It's your choice whether you pay money upfront or later, and how much time you want to spend reaching the level of success you want to achieve.
As a reward for reading this article, please listen to my FREE 7 Step Formula course. It won't teach you how to become a property developer, but it's a great way to understand all the elements that are involved in that journey. It will either inspire you to move forward on that path, or help you realise it's not for you. Enjoy!
