I get it - you are always hunting for opportunities to grow your business and achieve success. The world of SME development and investing can be challenging and risky. Some don't take the first step on the journey while others fall by the wayside, discouraged and broke(n).
Many of us in the industry come across potentially profitable opportunities. But very often, something inhibits us taking advantage. In this article, we explore five things that may be stopping you from acting on good ideas in the realm of real estate development & investment.
1) Finding and securing opportunities
Decent investment opportunities are usually scarce, and your readiness determines how best you can take advantage of them when they arise. Many people may lack the ability to scout, qualify, and take advantage of enough deals to make a success of their business.
Small teams often lack the breadth and depth of skill, contacts and experience in finding and identifying opportunities. And let's face it, not being able to find opportunities spells the failure of the venture. In a competitive market, it is essential to find ones that are the most strategic and offer the best value for money, particularly with your long-term vision in mind.
It's also important to map where these opportunities sit in the bigger picture or landscape. There's no point in building luxury apartments in an area surrounded by student accommodation, for example. Or expect to find a social housing opportunity in the heart of a thriving commercial district.
Many SME Developers (SMEDs) and Investors fail to recognise how an experienced partner can help them make this process easier, faster, cost-effective, and profitable in the long run. You will fail at 100 per cent of the deals you don't know about, so why grumble about paying someone if it helps land you a plum deal?
2) Raising money and managing cashflow
The inability to raise affordable financing that will cover the project is one that often leads to the fall of many promising SMEDs. Finding the right finance to promote your development is crucial, and you must be meticulous in your research.
There are many lenders in the market, but identifying which one fits your needs is an additional difficulty the SME developer has to contend with. Deciding on the scale of investment, the product's position in the market and likely returns is challenging enough. But the complexity of the lending market can potentially affect your ability to act on good investment ideas.
Many SMEDs also have problems managing their cashflows due to weak resource management. Even if they land great opportunities, their poor control of the cash flow affects their ability to exploit these deals to their advantage.
Acknowledge that there are people far more knowledgable in this sector. Listening to them (most importantly) will ensure you put together the best possible investment stack and implement systems to run your cash flow effectively.
3) Inability to plan properly
For a SMED or Investor to be successful, they require a plan or road map. This planning ensures their vision is met by following a clear set of processes and systems. It must also reflect where they fit into the overall landscape.
Mapping out the processes and systems will enable the SMED or Investor to replicate their success time after time. But lacking a clear ambition and structure within which to achieve it, is one of the most common things that will stop you in your tracks.
Having a vision entails mapping the opportunities, evaluating if they are worth it or not, and documenting the steps that will guide you in fully exploiting them.
Many developers do not have the time, financial resource, or expertise to do these things. They rush full-steam into a deal solely on economic considerations. In hindsight, they may have opted out of some of these opportunities because it derailed them from their ultimate objective.
By putting instant gratification above long-term efforts for bigger and better success can be a crippling opportunity cost.
4) Underestimating the ecology of a project
The pre-construction and construction phase are finely-tuned, intricate stages of a development's success. There are so many moving parts, professionals, skills and requirements that a whole ecology exists in this phase of the journey alone.
From planning consultants to project managers, quantity surveyors to ecology experts; knowing when to engage them and how they can help or hinder one another is a book in itself.
Do not expect to be able to micro-manage this phase of a project. Your primary role in this phase is to be a communicator par excellence. Your watchwords are clarity, consistency and speed of communication.
5) Managing the exit
Rather than "Build it and they will come" SMEDs and Investors should recognise trends, and wherever possible, get in as early as possible. Don't try to blaze a trail - as the saying goes "You can tell the pioneers by the arrows in their backs". But try and be on the first wagon train after them.
It is essential that you develop with a target market in mind as this will make the process of selling easier. Be careful not to introduce personal biases into the development. Striking a balance between your preferences and what the market wants (and will pay for) is essential when the time to sell comes.
The end-game for every developer is to deliver the scheme at a profit. If you intend to keep them in an investment portfolio, the idea is the same.
How nReal help you reach the APEx
Many things would stop you from acting on a good idea. SMEDs & Investors should continuously seek to utilise their competencies to get the most out of the opportunities that emerge in the market.
As importantly, they should recognise their weaknesses and gaps in their skillset and call for back-up. And it should be done in a proactive, not reactive manner - like they say "Fail to plan, plan to fail".
There is too much for a one-person or small company to handle on their own. Time, skill or financial constraints are limiting, and it's ok to acknowledge you need help.
We look for gaps in customers' skillsets and see where to join the dots. We think people would be more satisfied with their business (and life) if they understood what was important to them and focused on that, leaving nReal to fill in the rest.
nReal also brings professional partners to boost you at crucial points in the development & investment journey; including introducing funding, with over £40M in equity raised for clients so far.
Contact us today if you think we could help you.