Investors create growth from developing or building a high amount of multiple units in a complex.
Keys to make it work:
- Feasibility studies
- Due diligence analysis
- Research on supply and demand
- Research on price movement
- Design efficiency level
- The smart cost structure
This strategy is only suitable for an investor with very good funding resource and an established marketing background. The project size could require a substantial amount of upfront capital. The bank's lending ratio tends to be lower for this type of investment financing.
Time frame and exit strategies:
The projects can vary in length depending on the sustainability of the funding and the operating process. Often, the investors would sell the units both during the building process and at completion of the project to realize capital gains or release their equity.
The return perspective:
It usually generates very good returns depending on the location, market force, price movement, project quality and reputation etc.
Using this strategy while employing the efficient cost structure and working with the right developers could create rapid and massive wealth growth for investors.
The potential risks/difficulties:
The funding might not be sustainable, and the market might offer surprises. The project might face significant delays for various reasons from time to time, which could result in bankruptcy or financial difficulties for both the inexperienced and the experienced investors.
Often, it isn't easy to work out one accurate cost structure and maintain steady funding throughout the project; however, this is the key factor in the success of the deal.