Property Development is a multi dimensional business which can refer to renovation and re-lease of existing properties or the acquisition of properties or raw land for the purpose of improvement and/or resale to others.
With investment dollars getting tighter and tighter, lenders, stakeholders and investors are requiring more proof that the investment is sound. It is becoming increasingly important to perform good timely due diligence and document it well. Property investment deals are getting more competitive and the amount of money available to spend on due diligence is shrinking.
At first glance it seems like a bit of a catch 22. Actually this just means property developers are going to have to be smarter about how they go about their business. Having a comprehensive yet concise report that establishes project feasibility, identifies risk areas and delineates the plan for development will be just what is needed by lenders and requested by stakeholders.
This approach may have been the exception in the past, but it will be the standard in the future. Rest assured, if you do not have a compelling case of project feasibility, lenders and investors are going to have a difficult time providing the financial backing. And you had better be able to communicate it clearly and concisely.
This is no different than any other business venture. You have to have the backup packaged in a way that it can be referenced accordingly to verify feasibility.
Businesses are in a constant state of proceed at your own risk.
The building and construction industry has been charting a different course for a long time. It is broken and needs to be fixed. Restoring the construction industry is a monumental task but one thing is for sure. As we move forward property developers had better get organized. If you are a developer and you are looking for financial backing from an outside entity you better have a plan and your plan should be documented well. This should help demonstrate that you know what you are doing.
The process requires someone who is able to look at an apparently insurmountable mass of due diligence and pull the items apart and sequence them one at a time into a logical progression of smaller steps or milestones. It takes a conceptual thinker. It takes someone who does not get stifled by the magnitude of the task at hand. It takes someone who has a comprehension for the entire process including a reasonable understanding of the responsibilities of all parties and stakeholders. It takes a conceptual thinker.
New development projects need a risk management plan. Existing property modifications need a change management plan.
The key to effective risk management and change management is to have a system that has measurable results. Risk management or change management for any project can be tied into a milestone schedule to assess and measure risk as it applies to scope schedule and budget.
Risk management is essential to success in business. Most of us are very well equipped to manage risk and change effectively. Our everyday activities prepare us well. You can find numerous parallels in everyday life.
Make a plan, have a plan. You’ll be glad you did!