How to structure your first development deal (step-by-step)

At Highspire, one of the most common roadblocks we help our coaching program trainees with is structuring their operating companies to effectively build wealth through real estate development and investment. 

You might be wondering what that process looks like.

So instead of giving you a theoretical answer, let’s briefly walk through a real example from last summer:

A construction company owner from Sacramento, CA decided he wanted to try his hand at real estate development. He came to us for help, and we applied our course material to get him started.

We started off by helping him build his network, setting him up with brokers and realtors who could give him access to off-market deals. We began by assessing whether his company was structured to successfully develop real estate tangent to daily operations. This involved ensuring that his operations, financial controls, and marketing and sales systems were robust enough to support the new venture. 

 Once verified, we helped him choose an asset class that made sense for his community.

From there, we:

1. Determined what size of deal he was comfortable with

2. Determined what size of deal he could actually afford

This is an important distinction to make — because in our experience, if a construction company hasn’t done real estate before, then the deal that they can get is probably bigger than what they should get.

For that reason, we recommend that most people start with a simple, lower-stakes first deal, so they can get their feet wet and learn how the process works.

That’s exactly what this owner did, and it worked like a charm.

Getting hands-on with a smaller deal (4-8 housing units) quickly taught him a fundamental lesson:

Investing in real estate is like investing in stocks.

You have to look through a ton of deals before you find one that’s a good fit, or you risk throwing a lot of money down the drain. And unlike stocks, it’s hard to get out of a real estate deal once you’re locked in.

As part of his training, we taught this owner how to make accurate assessments on deals, fast, and carved out time to do it every day.

The result? His first deal was a huge success.

It took at least 30 tries before we found one that made sense, but we ended up successfully negotiating for 15% below asking price!

This experience revealed an important truth:

Real estate will add more stress to your construction company’s plate, not less.

That’s why we always make sure companies have a rock-solid cash flow pipeline in place first (plus accountability structures and sales systems), with a specific amount of free cash flow allotted to real estate, before even considering making deals.

That said...

Whether your company’s already healthy, or needs a little push to get on track, we’re here to help.

If you’re an ambitious, experienced construction company owner who’s ready to transition into real estate development and/or investing, our coaching program will guide you by the hand — giving you all the tools, training, and mental models you’ll need to make the leap.

To learn more about joining the next cohort, book a consultation call here.

Forward always,

Highspire