(Newswire.net — December 1, 2022) — The impact of a real estate development project exceeding its anticipated budget can be disastrous, and yet it’s also a worryingly common occurrence.
Avoiding it in your own efforts is down to understanding where others have gone wrong, so here’s an overview of the frequent causes of budget overruns so that you know what to look out for.
Real estate developers are disorganized and don’t have accurate data
A lack of order is an obvious issue in anything as complex as a real estate development project. Worse still, if decisions are being made based on data that is inaccurate or out of date, then even operations that are relatively slick will suffer the consequences in the long run.
That’s where using a platform like Northspyre comes into its own. Putting data-driven decision-making at the top of the agenda, and ensuring that it’s easier to collect and organize information from various sources, is possible with the latest solutions made specifically with this industry in mind.
Labor costs are rising
Wages are increasing across the board at the moment, and this means that budgets can be stretched to breaking point even if they are handled within the allotted time frame.
This is a reality of the state of the market right now and is exacerbated in the world of real estate development because of the skills shortage that also afflicts lots of projects.
Communication is fragmented
The many moving parts of a real estate project make good communication the most important asset of any manager.
Liaising with in-house team members, third-party contractors, colleagues, and clients is a chore, and it takes a mix of assertiveness and efficiency to get it right.
Modern communication tools do make this less taxing. However, there also need to be policies and best practices for keeping everyone in the loop to avoid miscommunication and the delays that will result.
The climate can interfere
Inclement weather conditions may send a construction project’s budget spiraling upwards, especially if it’s unsafe or impossible to work on a given site for the duration of more severe climatic situations.
Having the plan to deal with such eventualities is sensible. There are always ways around potential problems or changes to the schedule which can be implemented to avoid snafus.
Initial estimates are unrealistic
Another issue that gets brushed under the carpet is the fact that developments can cost more to complete than originally expected because the budgetary forecasts conjured up at the start simply aren’t aligned with the reality of the project.
There’s no point in setting a head-turning low estimate for completion costs in order to tempt a client to hire you, only to soar way over that amount once you get started.
While being realistic might not have the same impact when pitching a project, it’ll serve you better over time.
Contracts are improperly put together
If the contracts issued to participants in a real estate development project aren’t water-tight, then the wiggle room provided to contractors and others might leave you out of pocket.
Being precise in the language you use and covering all the bases is crucial. Working with an excellent legal expert to handle the wording of contracts is also a sensible step.
Final thoughts
Even a real estate development project which has been planned to within an inch of its life can still encounter hiccups that cost money. But the point is that by doing everything you can to reduce the risks, you’ll be maximizing your chances of coming in under budget, and impressing clients as well.