You’re an Urbanist? Excellent. Why Aren’t You a Developer Yet?

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A napkin sketch showing how to add an attached ADU and a detached ADU to a small existing house on a 50′ x 100′ lot in Portland, OR.

I continue to ask Urbanists “why aren’t you a developer yet?” That’s a sincere and serious question. I am serious about recruiting Architects, planners, engineers, activists who consider themselves to be urbanists (New or otherwise) into the ranks of the small developer cohort because I think it is the best way for an urbanist to have an impact in a place they care about. If you have devoted thousand of hours of study and practice to what makes a good place, why leave the construction and renovation of buildings to developers? This question becomes a bit more pointed when you recognize that many conventional developers are doing work in urban settings under duress or without much of a clue how to make their efforts fit a more urban context.  I think the typical generalist/urbanist will do a better job than whatever big development outfits are working in their city.

While Urbanists are working to heal the city or build better places, they should hang onto some of the buildings that get built/rebuilt along the way.  Having a modest portfolio of buildings that pay rent will help them weather the next recession.  (It is really hard to make a living doing fee for service or consulting work when nothing is getting built).

With those reasons in mind, we still need to have a sober and realistic grasp of what is involved for someone making a transition to become a developer, given the arena they are likely to operate in.  This stuff ain’t easy.

People tend to think that all real estate developers make a ton of money, because some developers have.  For every major league star in the real estate game there are scores of people hustling to make a living by making their neighborhood better.  Lots of people are fooled by the guy in the nice suit driving a  very nice leased vehicle.

I don’t know how people arrive at the amount of money they assume is made on a development project. The assumptions may be ridiculous, but until somebody actually goes through the process, it is not reasonable to expect them to know the math.

I also recognize that until you can demonstrate otherwise, a new developer is part of a disgraced enterprise. So folks considering taking up this work should not expect thanks or regard.  Start small. Hustle on a small project will help you acquire the know how and relationships that will make larger or more complex projects possible, but hustle will only take you so far and you don’t want to get into a project that will turn you into a former developer because it is too big or complicated.

8 thoughts on “You’re an Urbanist? Excellent. Why Aren’t You a Developer Yet?

  1. Elise September 7, 2016 / 9:54 pm

    I am an urbanist only because I want to live in a walkable community (I have before and it’s awesome). I am not an expert in ANY of the areas you have listed. Is there room for me too?

    • rjohnanderson September 8, 2016 / 7:12 am

      There is plenty of room for you and you may have an easier time of it. People with long experience in a specialized area have a hard time fighting the urge to solve every problem they encounter with a solution from their specialty. You can avoid that problem.

  2. Lloyd Alter September 8, 2016 / 4:18 pm

    I am an architect and I became a developer, working for a big one for a few years and going out on my own. When I was in practice as an architect I was always amazed at the people who were small developers, how easy it all seemed, and it is in a rising market. I became one myself and did some significant projects in Toronto. In the end I got screwed by partners, left hanging by banks, lost a major amount of money and pretty much had a nervous breakdown that left me in a mess for a few years until I found writing.

    This is dangerous talk. When things turn (and they do in seconds) you are dead and gone and the lenders are picking through your sock drawers. You need a particular personality, an appetite for risk, and even the smallest project can squeeze you dry.

    Having been an architect, an urbanist, a writer and a developer, from experience I can tell you that the skill set needed for being a developer is very different from the other gigs.

    And I have also learned from personal experience that there is nothing so dangerous as a sketch on a napkin.

    • rjohnanderson September 8, 2016 / 7:40 pm

      Sorry to hear about your bad experience as a developer. I will have to disagree with the notion that being a developer requires an appetite for risk any more than any other gig in the building of good places. Is it more risky than being an Architect, Engineer, or city planning staffer when the work dries up in a recession? Is it more risky than stamping construction documents as an Architect or Engineer, taking on personal liability for defects in a building (real or imagined)? People who understand their work and the culture they work in mitigate risk with know how every day. How does an Architect protect themselves from a lawsuit for a faulty handrail design that might result in someone being crippled or killed? By knowing how to design a proper handrail and having their partner review their drawings. Does the risk goes away? No. But it can be mitigated and managed by grownups. Same with development practice. It is important to be disciplined in choosing the scale and complexity of your projects. It is important to structure your deals properly because the consequences of a lousy deal structure can be significant. If humans are not capable of learning a new skill set, they should definitely never take on the work of being a developer. They should also never drive, play basketball, or have sex.

  3. adamchern September 9, 2016 / 8:00 am

    With respect to the author, I must echo some of Lloyd’s sentiments. In most professions there is a firewall between your work experience and your personal life. No one need feel sorry for developers, but it is important to recognize that the risks associated with that activity are of another level of magnitude. When undertaking a development almost everyone gets paid before the developer, with the developer relying on what’s left over. Also, the banks do not require personal quarantees or equity form anyone but the developer. When a market turns south for any numebr of reasons, it is the developer who holds the risk. True, we all feel the effects of shifts in the market, and those effects can be significant. But there’s a big difference between a downturn in levels of work available and losing yoour home, life savings, and reputation. It’s not just down to skills either. Unless predicting the future can be considered a skill. Take it from someone who is working on signing some pretty daunting documents that put all of my personal resources on the line if folks don’t line up to buy what I’m selling.

  4. rjohnanderson September 9, 2016 / 4:08 pm

    Adam,

    How large and complex a project did you think I was suggesting for a first time developer?

    Yes, I understand the consequences of signing a personal guaranty on a construction loan or a mortgage.

    The risk of signing a personal guaranty
    On a 30 year mortgage on 1-4 units with the VA, FHA, Fannie Mae, or Freddie Mac carries less risk than signing the closing documents for the mortgage on a house that requires two incomes for the household to make the monthly mortgage payments. One spouse loses their job and you could lose the house. If you are living rent free in one of the four units in your four-plex, your household finances are much more resilient.

  5. rjohnanderson September 9, 2016 / 4:09 pm

    Adam,

    How large and complex a project did you think I was suggesting for a first time developer?

    Yes, I understand the consequkences of signing a personal guaranty on a construction loan or a mortgage.

    The risk of signing a personal guaranty
    On a 30 year mortgage on 1-4 units with the VA, FHA, Fannie Mae, or Freddie Mac carries less risk than signing the closing documents for the mortgage on a house that requires two incomes for the household to make the monthly mortgage payments. One spouse loses their job and you could lose the house. If you are living rent free in one of the four units in your four-plex, your household finances are much more resilient.

  6. Michal September 14, 2016 / 4:29 am

    Dear John,
    That’s a great perspective for an urban planner. As one I wish I could work for a developer but unfortunately I live in Poland where urbanists aren’t known as a profession.
    I’d move if I had an opportunity.

    PS. Great blog here. Keep the good work!

    Best,

    Michal

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