A New Developer? Start Small.

Q Washington: A friend and I are thinking of starting our own real estate investing/development firm. What are the basic things we need to do to get started? Do you know of any good sources of information that could help us?

A Jim Abdo, chief executive of Abdo Development: Start small. The biggest mistake most people make when they want to enter real estate development is trying to take on too much, too fast. Know that you are going to make mistakes. It is better to deal with mistakes on a smaller project than on a larger one. As your confidence and knowledge grow, so can the size of your projects.

A great source of information can be found within the District of Columbia Building Industry Association. Joining the association would get you direct access to the movers and shakers of D.C. real estate. There are excellent presentations and lectures available through DCBIA membership.

Finally, this is a time to be careful in the marketplace. While the fundamentals of the market are very sound, and I believe the future is quite bullish, you are arriving a bit "late to the dance." Opportunities continue to exist, but the market is significantly more complex and crowded. All the more reason to pay particular attention to my first point: Start small.

Richard Kent Green, Oliver T. Carr Jr. Chair of Real Estate Finance at George Washington University: The most important thing you need to get started in development is capital -- both equity (i.e. you and/or your business partners put up cash) and debt (i.e. mortgages).

Attracting capital is relatively easy -- once you have already proven yourself to be a successful real estate investor or developer. When you are starting out, attracting capital is considerably more difficult. One way to begin is with four-unit rental properties. These properties can be financed with 20 percent down payments and single-family mortgages. If your credit history is good, you should be able to obtain financing at attractive terms.

You should be aware, however, that such property in the D.C. area is currently rather expensive to buy relative to the rental income it generates. Prices are much lower in Baltimore, Philadelphia and Richmond, but managing properties from a distance can be difficult.

The leading organization for real estate development is the Urban Land Institute, which puts out many good how-to publications. Richard Peiser's and Anne Frej's book, "Professional Real Estate Development" (ULI Press, second edition), is also very good.

Send your real estate questions torealestate@washpost.com.