In part two of this article series – Development Risks Pt 2 – we discussed some ofthe risk factors when developing residential property.
In this article we will take a brief look at: Missed opportunities, Initial purchase and Business management.
The development process can be long and drawn out. During this time other opportunities may pass your way and the urge to invest capital that is not realised profit from your first development is tempting. Exposing the cash-flow of one development to secure another is not a good strategy.
One of the most fundamental and foundational decisions to be made in any development is the purchase of land. We have already discussed some of the factors your land parcel will possess – environmental, locality, regulation – other factors such as the basic shape of the lot will affect the yield.
Your initial research before purchasing a land parcel is crucial. Do not be swayed by the sales process. Do your due diligence.
Basic business principals apply here. The most critical aspect you will need to but on-top off is the management of cash-flow. Everything else is academic compared to not keeping the flow of cash when it is needed.
Developing residential property or any other type of property does not need to be risky. Not understanding the risks in play for your project and not managing them adequately is your biggest challenge.