Property Development – Achieving the Optimal ROI

When do you achieve the optimal Return on Investment in a property development?

Development Management is often mistaken as a project management function only. Development Management actually entails a wider spectrum of expertise required to ensure that the processes required from a project management, marketing/sales and a financial management perspective of a development is optimally synchronised to ensure that:

·        the development is completed on time;

·        within budget;

·        the full scope is completed;

·        at the desired quality; and

·        the financial and non-financial returns are achieved.

Development Management ensures that all five goals are planned and managed from a holistic approach and not in isolation as is very often the case.

As the legal and approval processes associated with all development applications can become very complicated and costly in South Africa, the associated timing of investment into a development’s infrastructure and top structures becomes critical for a project’s success.

Albert Einstein said: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” If you are on the wrong side of compounded interest it will diminish your return on investment substantially in a very short time frame.

Completing a development on time can sometimes mean that half of the battle is won. Completing a development in a shorter time frame than expected can more often than not have a more positive impact on a development’s ability to provide the desired return on investment from a financial perspective than the negative impact that budget overruns can have.

Achieving the desired return on investment is, however, not always linked to the shortest possible time frames. If managed holistically, it becomes clear that in certain circumstances it is more beneficial to delay an investment (i.e. into infrastructure) or to delay an approval than to expedite the matter.

The question is, however, how do you manage to achieve this? And the answer to this question is: Development Management from a specialist that not only understands what should be done, but also understand when not to do it until the optimal time has arrived.

RedCubed Consulting is a Development Management and Town Planning firm specialising in providing professional services to prospective property developers. We will consult with you and find the best solution based on your specific development needs. Contact RedCubed Consulting – we look forward to hearing from you. tinus@redcubed.co.za | +27 (0) 82 923 4812