It’s easy. You have the real estate and access to financing so all you need now is to get some designers to design it, have some Contractors price it, negotiate the cheapest possible price and you’re off to the races!
Sounds good and can’t fail in this market! Or can it?
Although it may seem simple, the Design and Construction processes is much more complex than most new investors appreciate. Each project is unique involving multiple stakeholders, conflicting agendas, a host of unknowns and a maze of inherent risks which, if not effectively managed can severely impact the financial success of your project.
The past few years has seen rapidly accelerating incidences of projects running way over budget, way behind schedule, of questionable quality and more prone to costly disputes. Think about what this could do to your proforma! Disturbingly, such outcomes appear to be becoming the new norm rather than the exception.
Why is this? There are several contributing factors however, much of it boils down to poor Risk Management. Simply put: If your Project Manager is not aware of or is not effectively managing your risk then he or she is not effectively managing your Project. Consequently your Project is more likely to suffer negative outcomes.
So how does an investor new to real estate navigate the unknowns? First, ask yourself if you are fully aware of the risks involved and do you thoroughly understand them? Do you have the experience and expertise to manage them?
If the answer ranges between ‘I’m not sure’ and ‘No’, you’ll want to stay tuned for our upcoming articles focused on identifying and managing risk through the Design and Construction Process.
In most cases the Design and Construction Process naturally divides itself into three discrete but often overlapping Stages;
The Preconstruction Stage. This stage takes the project from initial concept through design development to working drawings and specifications.
The Procurement Stage.
During this Stage the output from Stage 1 is used to procure a General Contractor or Construction Manager, either on a competitive or a negotiated basis, to manage construction of the project.
The Construction Stage under which the project is constructed, commissioned and readied for occupancy.
All three stages contain unique but interconnected risks which need to be identified and effectively managed both holistically and at each individual Stage of the overall process. Misinformed or erroneous decisions, particularly during the earlier stages of a project, tend to resurface in subsequent stages and are difficult, sometimes impossible to rectify. This can have a drastic impact on the profitability of your project. Point being… get it right from the beginning!
In the meantime, take a moment to connect with me directly on Linked In or browse Remcor’s recent projects. If you need assistance with your project, or require further information, please contact us directly!
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