Managing Risks in Property Development: Insights from Property Development Companies.
There was a time not so long ago when everyone thought they could become a property developer. If you had capital – particularly where it was earning little or nothing in the bank – and found an opportunity, I would see a simple spreadsheet prepared by a client showing how they would make a huge return with minimal risk.
Buy the land, get planning permission and then either build it or sell it and either way, make a nice tidy sum. Of course, the spreadsheet model would ignore the multiple ways in which what seemed simple is in fact anything but and the countless issues that could realistically crop up and move the profit needle quickly and dramatically.
In property development, there are significant risks and managing those is key to the success of property development companies. These are just a few:
1. Due diligence
Thorough due diligence is critical when it comes to managing risks in property development. This involves conducting extensive research on the site and surrounding area to identify any potential issues that could impact the project. This could include checking for planning restrictions, environmental concerns and local infrastructure. Property development companies should also engage with the local community to ensure that their project aligns with the community's needs and expectations.
2. Work with experienced professionals
Even the most experienced developers need a team of professionals - architects, engineers, contractors, solicitors and yes... accountants are essential to managing risks in property development. They can help identify and mitigate potential risks and ensure that the project complies with all legal, tax and regulatory requirements.
3. Contingency planning
There has never been a project that runs completely to plan. Building delays and cost overruns, delays in the sale process, market changes and interest rate rises are just a few of the obvious areas to consider. Some if not all of these events will inevitably occur and they should be anticipated and planned for.
Having flexible financing that can adjust and adapt to events is critical. Most failed development projects run out of money when events overtake planning.
By conducting thorough due diligence, developing a comprehensive risk management plan, working with experienced professionals, maintaining strong relationships with stakeholders and monitoring market trends, property development companies can mitigate risks and increase their chances of success. It's important to work with qualified professionals who have extensive experience in property development to ensure that your project is a success.
It has never been more important to seek the proper advice, as good advice will add significant value! Please email me at email@example.com to further discuss your enquiries or click here.