Are you interested in learning how to become a real estate developer in Jamaica?
There are many ways to get involved in the real estate development business in Jamaica.
Successful developers make at least 20% in gross profit on their investment in 18 to 24 months.
Even small scale developers who renovate single family houses in 6-8 months for resale can make 30% in gross profits in less than a year in the right market.
I’m sharing my journey with you and providing you with some useful tips in this article.
- No formal education is required to become a real estate developer in Jamaica, but applied working knowledge is a must.
- Start small and work your way up. You’ll need to educate yourself on how to analyse properties, conduct market research, source funds, prepare development budgets, obtain approvals and permits, hire the right contractors, and sell or lease the property.
- Commit to a market segment (such as residential or commercial) and investing strategy (such as build to sell, or hold for rental income).
- Connect with reliable and experienced professionals.
- Build relationships with investors and lenders.
My journey began as a civil engineer at a consulting firm. At that firm, I practiced designing buildings, bridges, and roads and represented the interests of clients to ensure that contractors followed the specifications and appropriate building codes.
I was involved in real estate development projects at various stages. My roles included:
- Getting Approvals
- Construction as the engineering design consultant
- Periodic inspections during and during construction to check on the quality and progress of the work
But, I wanted to learn more about the business side of real estate development. I was curious and kept asking myself these questions:
- How did you acquire the right property?
- How did you determine the best use of the land?
- Where do you get the money for the project?
- How do you make a profit?
- What are the ways a project can go wrong and who are the best persons to minimise these risks?
So, I went to work for a large developer in the public sector. I gained invaluable working knowledge and practical experience in developing small and large real estate development projects.
What Do Real Estate Developers Do?
Real estate developers plan and manage projects from start to finish – from the purchase of the property to the sale of the last unit. The industry can be characterised into three main sectors:
Each sector has interesting niches such as apartments, single family houses, retail spaces, professional offices, warehouses, factories, and hotels.
What Are The Responsibilities of A Real Estate Developer?
Real estate development involves a complex series of steps, starting with market research and acquisition, to developing a feasible concept and detailed designs, and ending with an improved property ready to be sold or leased.
The developer must obtain the necessary permits and construction financing before starting construction. In some cases, you’ll also have to meet with the community to discuss the benefits of the project and address their concerns.
The typical responsibilities of a real estate developer include:
- Negotiating with property owners and financing institutions
- Analysing properties and the market to determine the best use for the property
- Navigating legal requirements, agency regulations, and building codes
- Communicating with contractors, suppliers, investors, and other stakeholders
- Financial management and accounting
- Time management and scheduling
Indeed, there are a number of skills, knowledge areas, and critical resources that are required to successfully put a project together. Even persons with decades of real estate experience can lose money if they don’t get it right!
Real estate development should be treated as a business and, like most businesses, expertise is needed in these critical areas for successful outcomes:
- Deal Flow (lead generation and conversion)
- Operations (efficient execution, and effective risk and cost management)
- Finance (appropriate funding and effective management of cash flow)
- Sales and Marketing (revenue and promotion)
What Are The Benefits Of Being a Real Estate Developer in Jamaica?
Real estate development is big business in Jamaica. It contributes significantly to the country’s national economy and is rivalled only by the tourism and services sectors.
You can get high returns from real estate development but this requires a strong appetite for risk.
Small projects, such as the development of 10 townhouses for sale, can yield at least US$300,000 in gross profits in 24 months depending on the:
- Quality of the units
- Construction efficiency
- Marketing strategy
- Financing structure
But, a lot can happen in 24 months. Your unit may be too expensive or not in high demand. It may take a long time to get building approval or your application may even be denied. You may be competing with many other developers in that niche market with few buyers, then you may lose money because you had to price each unit below cost or scrap the project altogether after spending money on designs, construction and paying developer fees and interest charges.
The work is demanding yet very rewarding despite these risks. A day in the life of a developer involves time spent in meetings, on the phone, and in the field. Here are some things we do ing the field:
- Scout for properties
- Pitch project ideas to potential investors
- Run numbers for budgets
- Hire technical consultants
- Seek financing
- Research market data
- Solve problems associated with project delays, scope changes, and cost overruns
We do this for every project. This list doesn’t even go into the activities involved in running the business such as staffing, running the office, accounting, strategic planning, navigating legal issues, and sales and marketing.
Who Do Real Estate Developers Work With?
Developers usually hire financial managers, project managers, real estate agents, lawyers, contractors, engineers, architects, land surveyors, and other professionals to execute the project.
But, the developer is ultimately responsible for the final decisions.
Tips For Your Journey Towards Becoming A Real Estate Developer
You don’t have to learn about real estate development the way I did because no formal training is required to be a real estate developer. But, having some knowledge of the development processes will help you assemble the right team of experts and advisors for your projects.
You may have built your dream house or helped your cousin fix up his family’s house in the country. But, that doesn’t necessarily mean you’re ready to take on larger ventures. It’s a good place to start though.
As you build confidence and savings, you can move up to buying single family houses in sought-after neighbourhoods that are in need of repairs. Research the market for the selling prices of comparable houses in the area that are in good condition to determine whether you can make money.
Remember to look at how long they have been on the market. This is a good indication of demand and whether there are any negative shifts in the real estate cycle. Also, research incidents of crime in the area, whether the house is on a busy road, and if it’s close to good schools and business centres.
Renovate quickly and in a way that would attract buyers. Put the renovated house back on the market for sale for more than it cost you to complete the project. Remember to account for all your expenses including your time.
Don’t cut corners because your reputation is important. Also, don’t get emotionally involved. You’re not renovating based on your preferences. Instead, you’re renovating based on what buyers expect to find in a house in that neighbourhood.
For example, stay away from weird floor plans such as having to walk through a bedroom to get to another bedroom or a kitchen that’s not connected to a living area. But, consider whether the floor plan can be converted so that you can get an additional bedroom or bathroom.
Don’t “over improve”. For example, don’t install granite kitchen countertops if comparables have sold with a less expensive but reasonable feature.
Have The Right Attitude
Having the right attitude for this business is important. It’s also important to have reasonable goals and expectations. The two most important characteristics for a real estate developer to have are:
Your success will depend on your ability to plan and properly execute projects that may take many months or even years before you make profit. There’s also no guarantee of a reward at the end.
Successful developers must take calculated risks and also be willing to walk away from bad outcomes before they become worse. Resist the urge to put more money into bad projects hoping to recover the money you’ve already spent.
You will always have to face challenges because you are trying to complete a project on time, within budget, and with good quality. There are many things that may get in the way such as the:
- Limitations of the property
- Rules set by planning agencies on how the property should be used and how to build
- Capabilities of the designers and builders
Each solution has advantages and disadvantages. A good developer must be able to think things through quickly especially when there isn’t a lot of information and you could make a mistake.
2. Good People Skills
You will need a network of highly motivated people who want to work with you so good interpersonal skills is a must. You must have trusted professional relationships with:
- Property owners
- Real estate agents
- Project managers
- Persons working in regulatory agencies.
It’s important that these relationships are based on mutual respect, integrity, and commitment to follow a professional code of conduct.
Financial Stability Is Key
Whether you’ll be using your own money or money from investors, you will need to have sufficient cash to buy properties, pay for the designs, and to build. Eliminating consumer debt will allow you to stockpile money faster. You also won’t be tempted to make money quickly by getting involved in very risky deals. Making money should be a slow and steady process.
In the early stages of your career as a real estate developer, lenders will look at your personal finances to determine whether they will partner with you on your project. It’s also good to have assets that could be used as collateral to raise funds at affordable rates.
Investors and lenders will not be comfortable working with you if you have too many outstanding financial obligations. But, their terms may not be attractive (high interest rates, large upfront fees, small amount of cash, or short repayment period) even if they’re willing.
Ask Yourself These Questions
- Can I handle stress?
- Am I patient but decisive when needed?
- Do I easily prioritise and troubleshoot issues?
- Am I comfortable with making decisions even when I don’t have all of the information?
- Am I able to command the respect and trust of those who work for me?
- Do I respect and trust those who work for me?
- Can I manage teams?
- Do I have strong analytical and research skills to make smart investment decisions?
If you answered yes to at least three of these questions, that’s a good start. Don’t worry though if you didn’t or still have doubts. It just means that you need to continue to pursue personal development goals and build your professional network.
Become An Apprentice
I recommend working with a developer for a few years or partnering with an experienced developer for your first deal.
Don’t just tag along for the ride though. Do your research. Find out what you can do for them so that it’s a win-win situation for you both. Can you help them…
- Scout for good properties?
- Follow up with agencies to fast track obtaining approvals?
- Manage the design team?
Meet with them and find out what they need and how you can help. With any luck, they’ll want to work with you.
Ideally, you’ll get paid to learn. But, don’t expect to get rich this first time out. Instead, focus on professional development and learning the ropes.
Set A Timeframe For Acquiring Skills
Take note of the skills you would like to learn and set a timeframe for acquiring these skills. This will help you keep track of your progress and prepare you to take advantage of other opportunities that may come your way.
The top three skills to learn and the best sources are:
Work for a real estate investment company or developer. You could learn how to:
- Prepare project feasibility budgets
- Raise capital
- Negotiate and structure deals
- Project Management
Work for a real estate developer. You could learn about the stages of a project, as well as how to:
- Prepare a project development budget
- Manage multidisciplinary teams comprising of architects, quantity surveyors, engineers, and finance managers
- Identify and manage project risks.
- Real Estate Analysis
Work for a real estate investment company. You could learn how to:
- Prepare project feasibility budgets
- Model project scenarios
- Analyse the market
- Structure deals.
The least impactful skills are:
- Construction management
- Sales and marketing
- Property management
How Much Does It Cost To Start A Real Estate Development Business In Jamaica?
The cost of setting up a real estate development business in Jamaica is moderate. If you’re serious, you’ll need about US$300,000 to US$500,000 for your first small project depending on your target market.
You will also need to register development projects consisting of 6 or more units or lots with the Real Estate Board of Jamaica. All development projects and developers must be registered before the units are advertised for sale.
The developer must submit a completed application form for each project. A downloadable version of the form is available at the Real Estate Board of Jamaica’s website. You’ll also pay a fee for each submission.
The application form for registered companies must be signed by two authorised directors with the company’s stamp or seal.
You will also need to submit:
- A police report for each director and company secretary.
- Certified copies of Certificate of Incorporation and Articles of Incorporation (for companies) or 2 passport size photographs certified by an Attorney-at-law, Pastor or Justice of the Peace (individuals)
- Proof of:
- ownership of property
- obtaining approvals and permits for the project
- financing for the project
If you reside overseas or have been overseas six months before submitting an application, you will have to submit bankruptcy and police clearances from your country of residence in addition to obtaining police records in Jamaica.
How Can You Build A Network of Real Estate Professionals And Advisors?
You need to work with people who can help you with financing, finding land, designing, building, managing a project, marketing and with finding buyers.
- Join professional associations and real estate investment groups
- Attend conferences and industry events
- Use social media to connect with other real estate professionals
- Go to Open Houses to see what other developers are doing and to meet real estate agents.
- Work with other developers
- Check out listings to connect with real estate agents and property owners
- When developments are advertised for sale, find out who the consultants are on the project, meet with them to find out more about who they are and what they do.
Hopefully, you’ve realised that real estate development isn’t only about construction. It involves a number of activities and processes from purchasing the land to determining the best use, designing it, financing the project, obtaining the requisite approvals and permits, construction, sales and marketing, and legal transactions.
Building a solid foundation and a trusted network of professionals and advisors is crucial. You should also have the right temperament to make medium to long-term plans, take calculated risks, analyse opportunities, troubleshoot complex problems, and work with a team.
You should be resourceful, decisive, patient, creative, and professional. A good reputation and work ethic are also critical.