How To Identify The Risks In Property Management To Achieve Financial Reward

With more people moving into property, more people are also looking at investment in property and property development – from small scale through to large.

“Property is currently seen as a rock-solid long term investment by a lot of people, and it can be one of the most financially rewarding things you ever do. However, getting involved in property development takes significant skill in project management, contractor management, understanding risks, and identifying opportunities to maximise profit – all without overcapitalising,” Lei Feng said.

Lei Feng is a dynamic and highly respected entrepreneur committed to changing the lives of like-minded property-obsessed investors. He is the proud founder and managing director of Collingwood, Victoria, company, PREER and an experienced thought leader in the sphere of property investment and development.

“I am not a self-made millionaire who went bankrupt until having learnt a life-changing secret. I am just a normal guy who turns out to have a great passion in property and is happy to share what I have learnt over the years with others,” Feng said.

“At PREER we have found that when most people are asked why they want to invest in property, it is because they want to create a better lifestyle for themselves and their family. Ironically, however, the game is not designed in favour of individual investors, like them or myself. Instead, it is designed to mostly benefit lending institutions, developers, and marketers. At PREER, our mission is to re-balance the game by supporting individual investors.”

Working typically with homeowners and passive investors, PREER develop projects across the residential, commercial and industrial sector.  Feng has shared his top four risks that people should be wary of when looking into property development.

Buying the wrong property

“Buying the right property is the key to unlocking the success of any investment property. It is incredibly important to secure a piece of real estate that fulfils the needs of your investment strategy and long term goals,” Fend added.

“In the world of property development, a significant proportion of your profit margin will be determined the moment you buy the property – so, site selection is critical.”

According to Feng, finding a development site that ticks all of your boxes is all about having an in-depth understanding of not just the property market you’re interested in but also the larger economic picture. Property development projects can take up to four years to complete in many cases, so it is essential to have an understanding of where the markets will be heading over the next few years.

Not understanding risk and possible causes for delay 

“When a property development project is delayed it is both frustrating and costly for the contractors involved. Weather, labour shortages, poor communication, project mistakes and conflicts, equipment failures, and missing or inaccurate data are all reasons that delays can occur. While there are some reasons, like weather, that are beyond the control of the developer, most construction delays can and should be avoided,” Feng explained.

“As a total tech enthusiast, I cannot recommend investing in a cloud-based communication channel and construction software more. Utilising the latest technology will ensure everyone on the project team is on the same page and timeline, all in real time. Collaboration, visibility and transparency are key to minimising and solving issues.”

Underestimating costs

According to Feng, the pre-construction process is as critical to the ultimate success of a project as the construction process itself. That is why at PREER they pride themselves on offering unparalleled service to their clients pre, during and post-purchase.

“In order to most accurately estimate your costs for a project, I recommend researching developments similar to your own and looking at their budgets, as well as devoting a significant proportion of your planning time to securing the correct permits for your project so that you can avoid any costly hold-ups,” Feng said.

Unexpected structural defects

“Unexpected structural defects apply more to renovation or rejuvenation projects, however they can result in huge losses in profit margins. If you are interested in developing an existing site, I recommend splurging on building and pest inspections from qualified, independent professionals before you make a purchase to minimise risks,” Feng emphasised.

“Being forewarned of any issues with a building or site is worth its weight in gold so that you can make an educated decision as to whether you go ahead with a deal or not. Pre-existing issues with a property does not always mean you should walk away from the potential project. At the end of the day it all comes down to whether you can collect a profit margin.”

The dedicated team at PREER believe wealth is the net value of hard work and constant education. They do not sell dreams at PREER; they guide their clients to build them. The strength they bring to their clients is that they offer support all the way from strategic direction to tactical implementation, including innovative marketing, pre-eminence, relationship capital, unique IP in driving development success, negotiation and sales, funding, and critical thinking.