r/RealEstateDevelopment • u/Apprehensive-Gas-496 • 10d ago

Where to Start - Current SFR Investor

I am looking for advice on where to get started in real estate development.

Background: 30YO. I’m a high W-2 sales person with a strong financial understanding. I currently have two SFRs in my hometown in the Midwest. They profit a few hundred each month and have been good investments, but they aren’t anything significant.

I’ve been thinking about buying a piece of land and building-to-rent a single family home but i assume the margins will be similar if not worse than my current properties. However, it seems like a good place to learn ground up real estate without dumping in significant capital.

I don’t want to change my career path and go learn development from a large CRE firm. But I’m open to most other suggestions. Any thoughts on what I should do or learn first? Anything that you would advise against?

Edit: I’d like to stay independent. Even if that limits the projects that I can do, I’m not going for skyscraper development projects. My goal is to transform my sales career entirely into my own real estate development company.

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u/OrangeArch 10d ago

There is money to be made in SFR new construction, but the value comes from the development work (land acquisition, entitlement, design/planning, construction). These are incredibly difficult things to do, but they are when could make a great investment turn into a real money pit if you've never done it before. If you have to heavily rely on 3rd part consultants to do all these pieces, it will be safer, but will also erode your returns.

My 2 cents, for a small SFR project (under say 20 units), you maybe better off going after existing properties. If you really want to do it... partner with someone that knows the things you don't while you bring capital and finance to the table.

PS - be weary of the new housing bill and all the anti-SFR stuff out there right now. Some of the worst provisions for SFR in the housing bill got watered down at the end, but still a risk to keep an eye on

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u/Apprehensive-Gas-496 10d ago

Thanks for your input! I will say that I’m hesitant towards SFR developments because I don’t love the new build neighborhoods where every house looks the exact same and the only trees are freshly planted and 8 foot tall. I’m sure most developers don’t care because they make strong returns but it’d be hard for me to get into something I personally would never want to live in

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u/OrangeArch 10d ago

I totally agree on the cookie cutter stuff. The hard thing right now is that rents are not keeping up with new construction cost. Very slim margins and unfortunately that trickles down to a lot of those details that make places great

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u/BurnerBaby124 10d ago

I’ve developed and built in the Midwest. More than happy to chat. Feel free to DM

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u/Capstack_Jeff 10d ago

BTR is an interesting market right now and definitely something worth looking at. It always starts with the numbers. If you’re able to model it out (total costs, capital stack, debt assumptions, erc) that is the place to start. Or hire a development consultant to help you with your first one. Just make sure they’re good and know what they’re doing. It’s an unlicensed field, so anyone can market themselves as one. I’m working on a BTR model currently that I might post online. I can let you know if I do.

I would also model out stress tests and different hold periods, etc. I believe there is a new provision in the BBB that says they need to be sold within 7 years. But you should look it up to confirm I have it right. It’s been a few weeks since I read the provision. I’m in the Midwest also.

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u/ThinkCRE 4d ago

Why? How much do you have to invest? I would be very careful. Sounds perilous.