Questions to Ask a Real Estate Developer
Before you commit cash, a loan or a piece of land to someone else's building project, these are the questions to ask a real estate developer face to face. They suit a private investor, a landowner weighing a joint venture and a buyer reserving a unit from plans, and they run in the order a careful decision does: finished projects first, then the money, the approvals, the construction, and your own terms and way out. The closing group is for students and newcomers who simply want to hear how development works.
The questions
Each question, and why to ask it
Track record
Which projects have you finished, and can I visit two of them?
Why ask it
A finished building can be walked through, and the people living or working in it can tell you how it has held up. Choose one that is a few years old over the newest, since leaks, empty units and tired finishes take time to show. If the whole list is renderings and sites under way, this developer has not yet carried a project to the end.
Have you built this kind of project, at this size, in this town before?
Why ask it
Townhouses, an apartment block and a retail strip are different jobs, and every planning department has its own habits. One new element is manageable. If the type, the scale and the location are all firsts, find out who on the team has done each before and whether that person is committed to the project in writing.
How did your last three projects finish against their original budget and schedule?
Why ask it
Request the first budget and the final cost side by side, since memory rounds in the developer's favor. Nearly every project moves, so the size of the gap matters less than whether the developer knows it to the month and the dollar. Naming the last three keeps them from choosing their best.
Which of your projects went worst, and what did the people who put money in end up with?
Why ask it
Anyone who has built through a downturn has one. You are listening for figures: what was projected, what came back, and how long it took. An answer that blames the market, the contractor and the city without one decision of their own is a preview of how a problem on your project would be explained to you.
Can I call an investor, a lender and a buyer from one of your earlier projects?
Why ask it
Each saw a different side. The investor knows whether reports arrived and money came back when promised, the lender knows how draws and bad news were handled, and the buyer knows what happened after closing. Put one question to all three: would you do another project with this developer?
What was your own role on each of the projects you list?
Why ask it
Developers sometimes count projects they worked on as an employee or a minority partner. That is real experience, but it is not the same as signing the loan and making the decisions. Get the name of whoever led each one, and permission to call that person.
Have you ever handed a project back to a lender, been sued by a partner, or left one unfinished?
Why ask it
Lawsuits, foreclosures and insolvencies often leave a public record, so this is partly a test of candor. How those records are searched differs from place to place, and an attorney can run the search for you. A hard story told plainly, with what changed afterward, is worth more than a spotless history you cannot confirm.
How many projects are you running now, and who will work on this one day to day?
Why ask it
A developer spread across five sites cannot give yours much of the week. Get the name of the project manager, meet them, and find out what they ran before. If the principal says they handle everything personally, ask what happens when two sites need them in the same week.
Who are the architect, engineer and attorney, and have you worked with them before?
Why ask it
A team that has finished projects together has already had its arguments. Look each firm up and check that it has done this building type locally. A consultant named in the brochure may not be under contract yet, so the useful follow-up is who has actually been engaged.
The money
What is the total project cost, and where does each part of the money come from?
Why ask it
The answer should be a one-page table, usually called sources and uses: land, construction, fees, interest and contingency on one side, and the bank loan, any second loan, investors' money and the developer's own on the other. The two totals have to match. Find your own line and see whose money would be repaid before it if things go badly.
How much of your own cash is in the deal, and when does it go in?
Why ask it
Cash is the word to hold on to. Deferred fees, land put in at a marked-up value and time already spent all get described as the developer's contribution, and none of them can be lost in the way your money can. Cash that goes in first and comes out last is the strongest sign their interests sit with yours.
Is the construction loan committed, and which conditions are still open?
Why ask it
A term sheet shows that a lender is interested, while a commitment letter comes with a list of conditions: a share of units sold in advance, an appraisal, all the equity raised. Read that list. If your money is wanted before the conditions are met, the question becomes what happens to it if the loan never closes.
How many units are already sold or leased, and how firm are those contracts?
Why ask it
A reservation with a small refundable deposit and a signed contract with real money down both get called a sale in a pitch. Get the count of each, and for commercial space the names of tenants who have signed leases as opposed to letters of intent. Then set that number beside what the lender requires before it will fund.
What sale prices or rents does the forecast assume, and what are they based on?
Why ask it
The support should be comparables: recent, completed, close by and of the same kind. A forecast built on the best sale in the neighborhood, or on asking prices, is optimistic by design. Take the figures to a local agent who has nothing to gain from the project and see whether they flinch.
Who do you expect to buy or rent here, and what else is being built nearby?
Why ask it
A developer who has studied demand describes a particular customer: downsizers from the surrounding streets, hospital staff, a grocery chain with no store on that side of town. The second half is about competition, because similar buildings opening in the same year chase the same people. If a market study was done, request it and find out who paid for it.
Who has signed a personal guarantee on the loan, and what does it cover?
Why ask it
Lenders commonly ask a principal to stand behind completion, repayment or both, and the difference is large. A developer with their own house on the line behaves differently from one whose exposure ends with the project company. If you are a landowner or a partner, ask directly whether you will be asked to sign anything similar, and take that page to your own attorney.
Which fees do you earn, and which are paid whether or not the project makes a profit?
Why ask it
Development, construction management, acquisition, leasing and financing fees can each appear as a separate line. Add them up and set the total against the developer's cash in the deal. When fees paid along the way exceed what they stand to lose, the profit share is no longer what keeps them working.
What happens to my return if costs rise ten percent or sales take a year longer?
Why ask it
This is a stress test, and a careful developer has already run it. The version to see is the one where both happen at once, because delays and overruns tend to arrive together. If nobody has modeled it, have it sent before your next meeting and note how long that takes.
How much contingency is in the budget, and who decides when it is spent?
Why ask it
The contingency is the allowance for what nobody priced. Find out whether it is a separate line or buried in the contractor's figure, and whether the lender has to approve each use. A reserve that is half gone before the foundations are in is an early warning, so have the balance included in every report.
If the project runs short of money, who has to put in more?
Why ask it
The agreement will have a clause on further contributions, often labeled capital calls. Read what happens to someone who cannot or will not pay: a smaller share, a loan at a penalty rate, or losing a vote. Decide before you sign how much more you could find, and treat that as part of what the project might cost you.
Where is my money held between the day I hand it over and the day it is spent?
Why ask it
Escrow, a lawyer's trust account, a project account and the developer's general account are four very different answers. The rules for buyers' deposits and investors' funds vary from place to place, so ask how it works where the project is and get the account arrangement in writing. One more detail to pin down is who can authorize a withdrawal.
Which legal entity would I be contracting with, and what else does it own or owe?
Why ask it
Many projects sit in a company formed for that one site, which usually means your claim stops at that company's assets. Find out who owns it, whether it has other debts, and whether the parent firm or the principal stands behind any of its promises. Then check that the name in the brochure is the name on the signature page.
Approvals
Do you own the land outright, or is it under contract or option?
Why ask it
An option or a purchase contract can lapse, and a project without its site is only a set of drawings. Get the closing date, the conditions and the price, then compare that price with the land line in the budget. If the seller is a company related to the developer, ask what it originally paid.
What is the site zoned for today, and does this project need a change or a variance?
Why ask it
A project that fits the current rules mostly needs paperwork. One that needs a rezoning or an exception depends on a vote, and votes can go the other way. Planning files are open to the public in many places, so a call to the planning department about that address can confirm what has been applied for.
Which approvals are already in hand, and which are still to come?
Why ask it
Get the list with dates: zoning or site plan approval, building permit, utility connections, anything environmental or to do with roads. Money that goes in before the main approval is carrying the risk of a refusal and should be rewarded for it. Some approvals lapse if work has not started by a set date, so collect those dates too.
What conditions came with the approvals, and what will they cost?
Why ask it
Approval often arrives with strings: affordable units, a new turn lane, a contribution to schools or parks, limits on working hours. Each is a cost or a delay, so check that every one has a line in the budget. The written decision lists them, and it is worth reading in place of anyone's summary.
Has there been opposition from neighbors or city officials, and how did the hearings go?
Why ask it
Minutes and recordings of public meetings are usually easy to find, and they show the mood better than a summary does. Organized objectors can sometimes appeal after approval is granted. The follow-up is whether an appeal is possible there, how long the window stays open and whether it has closed.
What did the soil and environmental reports find?
Why ask it
Contamination, rock, a high water table, protected habitat and flood risk are the findings that change a budget. Read the summary pages of each report and look for the cost line that answers them. Then ask who pays if the cleanup or the foundations cost more than the estimate.
Are water, sewer, power and road access confirmed for a project of this size?
Why ask it
A site can be approved and still wait a long time for a connection. Written confirmation of capacity from each utility is the proof to look for. Pipes, substations or road work off the site are sometimes the project's to pay for, and those items are easy to leave out of an early budget.
The build
Who is the general contractor, and how was that firm chosen?
Why ask it
Competitive bids, a negotiated price with a known firm and the developer's own construction arm each have a case. If the builder is related to the developer, the same people sit on both sides of the biggest contract in the project, so ask how the price was tested against the market. Whoever it is, look up what they have built of this type.
Is the construction contract a fixed price, a capped maximum, or cost plus?
Why ask it
The form of contract decides who pays for an overrun. Follow up with what is excluded, which items are allowances, and how finished the drawings were when the price was set. A firm price on half-finished drawings tends to be reopened one change order at a time.
What is the schedule from breaking ground to completion, and what has to happen before work can start?
Why ask it
A dated chart is a better answer than a season and a year. The second half matters as much: loan closing, permits, presales and demolition can each hold the start for months while costs keep running. Write down the dates you are given and raise them again at the next update.
Which three things are most likely to delay this site, and what is the plan for each?
Why ask it
A developer who knows the site names real things: a utility relocation, a long wait for elevators or switchgear, a wet season, a neighbor's access rights. 'Nothing we can foresee' means nobody has looked. For each risk named, check whether the schedule already allows for it.
If completion slips by six months, what does that cost and who pays?
Why ask it
Interest keeps accruing, the loan may need an extension with a fee, and profit is the first thing eaten. An investor's follow-up is how long the loan runs past the planned finish. A buyer's is whether the contract has a latest completion date and what they may do if it passes, since those rights differ by place.
What happens if the contractor fails or walks off partway through?
Why ask it
Replacing a builder in the middle of a project is slow and expensive. The protection might be a bond, a parent company's backing or money held back from each payment, and how each works depends on where the project is. It is fair to add whether the developer has ever had to do it.
Who inspects the work and signs off each payment to the contractor?
Why ask it
On a bank-financed job the lender often sends its own inspector before releasing each draw, which protects you too. Where there is no bank, find out who plays that part. Unpaid subcontractors and suppliers can make claims against the property in some places, so the project should be able to show how it confirms they were paid.
What reports will I receive during construction, and how often?
Why ask it
A useful report shows money spent against budget, progress against schedule, photos and a list of what changed. Ask to see one from a past project, with the bad months included. A quarterly letter saying everything is on track gives you nothing you could act on.
Who deals with defects after completion, and for how long?
Why ask it
Buyers need the name of who to contact, what is covered and for how many years, and whether an insurer or warranty provider stands behind it if the project company is dissolved. Coverage rules differ widely, so ask what applies to this building. An investor's version of the question is whether money is held back for repairs after the sale.
Terms and exit
Would my money go in as an ownership share or as a loan, and what secures it?
Why ask it
An owner shares in the profit and is usually repaid after every lender. A lender is owed a set amount and may hold a claim on the property, though a claim that ranks behind the bank's can be worth little in a bad outcome. Have the developer say which you would be, then check that the documents use the same word.
In what order does money come back out, and where am I in that order?
Why ask it
Lenders are normally repaid first. After that the agreement sets who gets their capital back, who earns a preferred return and when the developer's extra share begins. A worked example at three outcomes, a good one, a flat one and a poor one, with your own figure in each, makes the order plain.
What return are you projecting, and how is it worked out?
Why ask it
An annualized rate, a multiple of your money and a simple percentage can all describe the same deal and sound very different. Pin down which one is quoted and over how many years. Then compare what the last project projected with what it delivered, because a projection is an estimate and nothing more.
When do you expect the first money back, and what would push that date later?
Why ask it
Development often pays nothing until units close or the building is sold, so the honest answer may be a date years out. Check whether anything is distributed along the way and what has to be repaid first. Plan your own finances as if that date will be late.
Is the plan to sell the units, sell the whole building, or refinance and keep it?
Why ask it
Each plan leans on a different market at the finish: home buyers, investors with capital, or lenders willing to refinance. The fallback is what to press on, for the case where that market is weak in the month the building is done. A developer who can hold and rent for two years has more room than one who must sell at once.
Can I sell or transfer my stake before the project ends, and who would buy it?
Why ask it
Assume the answer is no in practice, even where the agreement allows it with consent, because there is rarely a buyer for a slice of an unfinished project. A pre-construction buyer should ask the parallel question about assigning the purchase contract: whether it is allowed, what it costs and when.
Which decisions would I have a say in, and what can you do without asking me?
Why ask it
Selling, refinancing, raising the budget, adding a partner and changing the plans are the ones that matter. Passive investors often have no vote at all, so find out where the line is drawn. The hardest version of this is whether the developer can be replaced for cause, and who would have the power to do it.
If I put my land into this, when does ownership pass to the project, and what do I hold if it stalls?
Why ask it
For a joint venture this is the central question. Find out the value your land goes in at and who appraised it, whether a construction lender would rank ahead of you, and whether the land comes back if nothing is built by a set date. Have your own attorney, not the developer's, explain what you would hold at each stage.
How much can the finished unit differ from the plans I sign?
Why ask it
Contracts for unbuilt homes often let the developer vary floor area within a tolerance, swap materials or adjust the layout. Get the allowed variation, how the finished unit will be measured and what you can do if it goes beyond that. The specification is safer attached to the contract than left in the brochure.
If the project is canceled or never starts, how and when do I get my deposit back?
Why ask it
Look for the events that trigger a refund: approvals refused, the loan not closing, too few units sold, a start date missed. Then find how many days the refund takes and whether interest comes with it. Protection for deposits depends heavily on local law, so have the clause read before you pay, and treat a vague answer as a reason to wait.
Which documents can I review before I commit, and how long will I have with them?
Why ask it
The agreement, the budget, the loan terms, the approvals, the construction contract and any appraisal are a reasonable request for someone putting in serious money. Two weeks with them and your own advisers is not a lot to ask. If the deadline leaves no time to read, treat that as information about the deal.
The business
How did you get into development, and what did you do first?
Why ask it
Developers come out of brokerage, construction, architecture, finance and family land, and the route colors what they are good at. A good follow-up is which skill from the earlier job they still use every week. If you are a student, ask which first job they would pick now.
How do you decide whether a site is worth pursuing?
Why ask it
You will hear some version of working backward: what the finished project could sell or rent for, less the cost to build it and a profit, leaves what the land is worth. Have them talk through a site they turned down. The rejections teach the method better than the wins.
What does your week look like when a project is under construction?
Why ask it
Many developers spend less of it on site than outsiders picture and more on calls with the lender, the contractor, the city and the sales or leasing team. The mix shows how much of the job is coordination and decisions made with other people's money. If one part sounds like work you would enjoy, say so and find out how people end up doing it.
Which stage of a project takes longer than outsiders expect?
Why ask it
Often the answer is the part before any digging: assembling land, approvals and financing. The natural follow-up is how the firm pays for those years when nothing is coming in. That is how you hear what a project costs before it exists.
What are you building less of than you were a few years ago, and why?
Why ask it
This gets at market conditions through a decision they made, which tends to produce a better answer than a request for trends. Listen for whether the reason is construction cost, lending or demand. Whichever they name, the next question is what would have to change for them to go back to it.
How does someone with no record of their own raise money for a first project?
Why ask it
Partnering with an experienced developer, starting very small and using family money are routes people commonly describe. The telling detail is what they gave up in that first deal, such as most of the profit or a personal guarantee. Then ask what made the second raise easier.
What would you do in your first two years if you were starting in development today?
Why ask it
Good answers are concrete: a job with a contractor, an analyst seat at a lender, a small renovation done with your own money. Press for the reason behind the choice. If they offer an introduction, take it and let them know afterward how it went.
How to question a developer before you commit
Practical guidance for the conversation itself
Before the meeting
Know which seat you are in
An investor, a landowner and a buyer are exposed to different things. An investor or private lender should spend most of the time on The money and Terms and exit. A landowner offered a joint venture needs the land question in Terms and exit and everything under Approvals, because the approvals are what turn the land into a project. A buyer of an unbuilt unit can pass over fees and the order of payouts and concentrate on the deposit, the completion date, how far the unit may differ from the plans, and defects.
Look up what is public first
Planning applications, land ownership, company filings and court cases are open to search in many places, though how and where differs. An hour on those before the meeting lets you ask about what you found instead of asking whether there is anything to find. If you do not know where to look locally, a real estate attorney or the counter staff at the planning department can point you.
Ask for the papers in advance
Request the budget, the schedule, the list of approvals and a summary of the terms a few days ahead. A meeting spent seeing the figures for the first time is a presentation. One where you arrive with ten lines marked is a conversation, and it shows the developer the level of care to expect from you.
Pick the ten that could change your mind
Nobody gets through 56 questions in one sitting, and a developer's patience is part of what you are spending. Mark the ten whose answers could stop you, ask those in person, and send the remainder by email afterward. Written replies to the rest are worth having in their own right, because they can be set beside the agreement later.
In the conversation
Ask for the document behind the answer
'The loan is in place' and 'here is the commitment letter' are different statements. Whenever an answer rests on paper, such as a permit, a construction contract, an appraisal or a soil report, ask to see the page. You do not need to read it at the table. You need to know it exists and that a copy is coming.
Put a number on the bad case
The forecast you are shown is the plan going right. For each of cost, time and sale price, ask what a poor outcome looks like in figures and where it leaves you. The questions on a ten percent overrun, a six-month slip and further contributions are there for this, and they work best asked one after another.
Ask the important ones twice
Raise the schedule, the developer's own cash and the state of the approvals in the first meeting and again in a later one, or with a second person on the team. Matching answers are reassuring. A date that has quietly moved or a figure that has shrunk deserves a direct question about what changed.
If you are there to learn, not to invest
Students and people new to the industry should lead with The business and borrow only lightly from the other groups, framed as curiosity about a past project. Asking a stranger at a networking event how much of their own cash is in a deal is a diligence question in the wrong room. Twenty minutes, four questions and a thank-you note make a good first meeting.
Checking what you heard
Walk a finished project
Go without the developer if you can. Look at the common areas, the parking, the state of the exterior and how many units or storefronts are empty, and talk to a resident, a tenant or the building manager. Ten minutes on site tells you how the firm finishes things, which no brochure for the next project can.
Call beyond the reference list
The names a developer offers are the happy ones. Ask each reference who else was involved, then call one of those people: a subcontractor, a loan officer, a buyer in the same building. Two questions are enough: were you treated as agreed, and would you work with this developer again.
Test the forecast yourself
Check the assumed prices or rents with a local agent or appraiser who has no stake in the project. Compare the building cost per square foot with what an independent contractor or cost consultant calls normal for that type nearby. You are not rebuilding the model, only seeing whether its largest inputs sit in a believable range.
Have your own advisers read the agreement
The developer's attorney wrote the documents for the developer. Before you sign or pay, have an attorney who handles this kind of deal in the project's location read them for you, and an accountant if tax changes your return. What the papers say outranks anything said across a table, so any answer that mattered to you should appear in them.
Warning signs
A deadline that leaves no time to read
'The round closes Friday' and 'only two units left at this price' are sales lines. Real deadlines exist, such as a land closing or a loan condition, and a developer can show you the document that sets one. If the urgency has no paper behind it, slow down.
Returns described as certain
Development profit is what is left after the lender, the contractor and everyone else has been paid, which makes it the least certain money in the project. A developer who promises a figure, or says no investor of theirs has ever lost, is overselling. Ask which sentence in the agreement backs the promise.
None of their own cash in the deal
A developer who earns fees from the start and has no cash at risk can do well on a project that loses your money. That arrangement is not always a reason to walk away, but it should change the terms you accept: a larger share for you, fees deferred until you are repaid, or a cap on what is paid early.
Vagueness about where the money sits
You should be able to learn which account your funds go into, who controls it and what they may be spent on. 'It all goes into the company' is not an answer for a deposit or an investment in a single project. Hold your payment until that is written down.
Irritation at ordinary questions
Most of the questions about track record, money, approvals and construction are ones a lender asks before it finances a development. A developer who treats them as an insult, or says other investors did not need this much detail, is telling you how updates will go once your money is in. Experienced developers tend to answer these quickly, because they have answered them before.