Why cutting corners in property development will cost you more in the long run.
Property development is an exciting and lucrative industry that offers many opportunities for investors and developers. It’s also a competitive and fast-paced industry, where developers are always looking for ways to cut costs and maximise their profits. However, going for cheap options can lead to significant costs in the long run.
In this article, we'll explore why cheap property developers will ultimately pay more.
One of the biggest risks of cutting corners as a property developer is a lower-quality end product. When you prioritise cutting costs over quality, you may use inferior materials or work with inexperienced contractors, resulting in a poorly-built property requiring frequent repairs and maintenance. This can quickly add up in terms of time and money, ultimately costing you more in the long run.
Cutting corners can also lead to legal issues down the line. For example, if you fail to obtain the necessary permits or follow building regulations, you may be subject to fines or even legal action. Additionally, if you use subpar materials or methods, you may be liable for any damages or injuries that occur as a result of your negligence.
Building a strong reputation in the property development industry is essential for long-term success. Cutting corners and producing subpar properties can damage your reputation and make it difficult to secure future projects. On the other hand, focusing on quality and attention to detail can help you establish a strong reputation and attract new clients.
Delayed project completion
Opting for cheap options can also lead to delayed project completion, which can have significant financial consequences. Delays can cause a ripple effect throughout the development process, impacting financing, marketing, and other aspects of the project. This can ultimately lead to lost revenue and a lower return on investment.
Developers that prioritise cheapness over quality may miss out on opportunities to secure high-quality projects or establish a strong reputation in the industry. Building a strong reputation is essential for long-term success in property development, and cutting corners can quickly damage a developer's credibility and reputation.
Lower return on investment
If you cut corners during the development process, your property may have a lower market value than it could have had if you had invested in high-quality materials and workmanship. This can make it more difficult to sell or rent the property and may ultimately result in a lower return on investment.
Additionally, when it comes to securing project funding, some developers can be overly pedantic over small fees, which, in the grand scheme, are rather irrelevant. While many frugal financial decisions are necessary, the issue arises when people focus too much on the small stuff while being oblivious to the bigger picture and the potential for profit further down the line upon project completion.
By haggling every cost to the nth degree, from interest rates, arrangement fees, exit fees, solicitors’ fees, and admin fees, the deal could be jeopardised entirely as time ticks away - especially if there is already a bridge loan in place with heavy default payments that will likely wipe out any savings made and more. Stressing over small savings can be detrimental to developers and prevent them from moving forward.
Cutting corners as a property developer may seem like a quick and easy way to save money, but it can ultimately cost you more in the long run. By prioritising quality, attention to detail, and adherence to regulations and best practices, you can build a strong reputation and produce high-quality properties that deliver long-term value.
Looking for the right development finance for your next project?
Speak to our Funding Specialists today.