Property has always been seen as one of the most rewarding investments. You select a piece of land on the basis of number of factors ranging from price to approachability and go to every extent to make it a success. But still many of the investors fail miserably when it comes to property development.

Every investment comes with a degree of risk and those who do not access these risks and their possible implications end up wasting their hard earned money. Here are some of the risks involved in property development so that you are well aware of what you are getting into.

Market downturn
Market downturn is one of the most influential factors that lowers property values. Apart from this, it further increases the holding costs until the developed property is sold. The cost of raw materials and amenities increase due to slowdown and turn the entire venture into a difficult phase.

Supply and demand ratio
The supply and demand ratio in property development keeps changing. If the supply is high and demand is low, it depresses the property values so you should be ready to handle this risk.

Approval process
Town planning approvals and procuring other licenses may delay the project unexpectedly. The movement of development applications takes time and some of the projects are even rejected. So you should keep in mind all these delays before starting the project.

Disputes
Cropping up of unexpected situations like disputes with the contractors, labor unions etc can cause major delays and increase the cost.

Increase in costs
With any boom, there comes an increase in construction costs as well. Further increases in interest rates can increase the costs invariably. The overall estimated cost of the project goes higher directly affecting the developer.

If you understand the kind of risks in property development, you can prepare mitigation and management strategies well in advance giving you a strong competitive edge over your contemporaries. It is not possible to have a project that is completely problem-free but with thorough risk analysis, you can  minimize the variation and have all the benefits of getting involved in such a big venture.

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The topic of property investing versus property development is always a hot one to inexperienced buyers interested in venturing into the property market. Though the two can be easily classified into one topic, the truth is that they’re quite distinct.

Property development refers to a situation where by a person acquires a residential property below the prevailing market value, often in a state of disrepair then develops it into something that can be put up for resale. Thus profit is realized by the developer. Time has to be factored into the equation as development is mostly linear and hands on. Meaning Individual property developers can normally only deal with one project at a time.

Property investment by contrast is about the rental market and is fully scalable. Scalability makes property investment more lucrative that property development. The best starting point for beginners is to conduct research on properties in a preferred area – local property agents could be a very useful source of information on properties. Avoid flats and apartments where you may have to include the charge of ground rent and communal maintenance since this charges will reduce your profit.

Note that your profit does not come from the potential of future equity rise on your investment but on the solid monthly rent payable by your tenants. As a parting shot, I’d like to make it clear that buying property for investment is a must do thing to people interested at securing their financial future, investment in property is a good way to hedge your funds against the corrosive effects of inflation.

When you purchase a good property, then you can be assured that its value will definitely appreciate in the future. But remember that if you find a good developer and a location that happens to be a jewel, then don’t shy away from it because its value will grow exponentially, giving you faster wealth growth as opposed to other investments.

Love life, not just the weekends. You only have one life, Live It! @ www.NicciAndLee.com