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4 of the Biggest Potential Risks of Land Developmen

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Land development is a potentially very lucrative business, but where there’s money, there’s a risk. Whatever the specifics of the project, you need to know the biggest risks and how to mitigate them.

Debt and Capital

As with every business, money is both your best friend and your worst enemy. You need upfront funds, especially when it comes to land development and construction. The project simply cannot get off the ground without money. Land prices are on the rise, so bear this in mind.

Alternatively, the project may start and stop intermittently, meaning that it will drag out for far too long. This can result in investors losing interest and if the project is eventually completed, less profit potential. The simplest way to acquire the needed funds is to take out land development loans. These will quickly provide you with the money and allow you to start the project as soon as possible.

Land Quality

The cheapest land available isn’t always the best land available. Often, this land is located far away from necessary infrastructures, such as schools, hospitals, and utilities. Providing even the most basic amenities for a potential development simply adds more costs.

As well as the cost of these infrastructures, you will have to acquire planning permission before building them. In some places, a residential permit doesn’t cover the permissions required for other projects. This will further slow down the project and cost even more money.

Even worse, the land might not be suitable for the development project that you have in mind. You will have to research the plot before you purchase it and determine any potential problems there and then. If you must, arrange for a land survey.

Unfortunately, research isn’t always perfect and issues may crop up. As with everything, these issues cost both time and money. You should always be prepared for any eventuality, but eventually, you will have to take a risk. Remember, the only way to succeed at this venture is to actually develop some land.

Bureaucracy and Legality

As previously mentioned, planning permissions and permits have to be acquired before a project can begin. This is one of the largest risks with land development, as it is easy to get something wrong. Always check the local governmental guidelines, as permit requirements do change from place to place.

Seek legal help when entering into a land development project. After all, failing to properly research this issue will result in expensive consequences.

Unreliable Contractors

A final factor that can result in land development failing before it can properly begin is unreliable contractors. The reasons for this are obvious, poor contractors will take your money without providing a good service.

The project may progress slowly, or even worse, the contractors may cut corners. This can cause accidents which further slow down the work. Alternatively, a poor job can eat away your reputation and make further projects more difficult. So, find a contractor you can trust.


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About the Author

Kaya Wittenburg

Blog Author and CEO

Kaya Wittenburg is the Founder and CEO of Sky Five Properties. Since the age of 10, real estate has been deeply ingrained into his thoughts. With world-class negotiation and deal-making skills, he brings a highly impactful presence into every transaction that he touches.

He is here to help you use real estate as a vehicle to develop your own personal empire and feel deeply satisfied along the way. If you have an interest in buying, selling or renting property in South Florida, contact Kaya today.

Feel free to call me at: (305) 357-0635
or contact via email: [email protected]