Risk Management

Same as the progress, all investment opportunities come with an element of risk.

Progress always involves risk: you can’t steal second base and keep your foot on first.

Same as the progress, all investment opportunities come with an element of risk. Depending upon the nature of the investment, there is always a varying level of risk involved, contributed by many of the external driving forces. Although, there are many factors that may impact the performance of any investment, we have tried to summarize a few of the most prominent risks that come as part of the package with any investment along with the risk mitigation strategies we follow to minimize the risks.

For the avoidance of any doubts, we always encourage the investors to make independent inquiries and/ or seek professional advice to safeguard their investment objectives and strategies.

General Investment Risks

These risks apply to all the investments in general, and are not limited to investments made towards our property development projects:

Market Risk

The term market risk, also known as systematic risk, often arises due to unanticipated fluctuations in factors that commonly affect the entire financial market. Market risk is not specifically limited to the company or the industry one is invested in; instead, it is dependent on the performance of the entire market and this may affect your investment to achieve the targeted performance or even fully recover the amount invested into those markets.

We always assess and keep the general market conditions into consideration when planning a project development and conduct due diligence on a potential investment. We mitigate market risks by monitoring general economic conditions, receiving regular reports on broad aspects of the Australian economy and the effect of market and other events on various categories of industries and properties.

Interest Rate risk

Interest rate risk is the probability of a decline in the value of an investment resulting from the unexpected interest rate fluctuations and is one of the primary drivers of an investment’s performance. These movements can negatively affect the value of an investment in various ways. Volatility in interest rates may affect the amount of interest that will be required to pay during the construction phase of a project, directly affecting the profitability of that project.We continuously monitor the cash rate set by the RBA and the interest rates of any third-party lender that a project may be exposed to via variable interest rate loans for any potential changes.

Liquidity risk

The investments made in a project development will be exclusively used to fund that specific project, which means that these investments cannot be withdrawn until the end of the investment term or until the end of the project, whatever be the case. Investors should only consider an investment in a development project if they are not likely to require access to their investment during the specified term of the project.

We mitigate this risk by issuing ‘Contract of Sale’ with detailed terms & conditions, clearly stating the term of the investment along with any unexpected potential delays. We encourage the investors to assess their cash flows before investing in any of our development projects and seek advice from a financial planner.

Mandate risk

The investments are tied against a specific property development project, and investors neither have a direct &/ or indirect control over the project development, nor how capital within that project is utilized.

Planning & Regulatory risk

Any property development project involves a lot of regulatory approvals from different government departments and there may be cases, when it becomes more difficult than projected, to obtain the mandatory regulatory approvals and permits for a project. This may lead to increased costs and cause delays to a development project. Furthermore, there may be planning or servicing issues to the development site, and this may force an encumbrance or easement from a government authority, leading to either delay or a reduced yield than expected.

We mitigate this risk by consulting with industry qualified professionals who have experience in liaising with the relevant government authorities and we apply for the planning approvals as soon as we get on board.

Property Development risk

Property development projects are generally a long term projects and are subject to its own challenges and risks depending upon site to site. Unforeseen environmental and ethnographical conditions, regulatory approvals and unanticipated underground conditions may significantly delay the progress of a project and these can delay and/or reduce returns to the investors in that project.

We mitigate this risk by engaging an experienced land surveyor and geotechnical engineers to evaluate the development site and only progress upon surety of development suitability.

Contractors risk

Third party contractors and agents engaged to undertake the works on the development site may become insolvent, bankrupt or may default under their contracts, leading to unexpected delays to find a suitable replacement, and this can negatively impact the timeline & profitability of the project.

We mitigate this risk by only selecting accredited contractors with a proven record of successfully completing the projects and who have a solid financial position. We make sure that the appropriate insurance policies are in place to cover the unexpected.

Sales risk

The investors plan for return of investment as soon as they get the titles for the purchased lots and a primary exit strategy for most of the investments is generally the sale of the developed properties. Depending upon the market conditions, sometimes, it may be more difficult than anticipated to sell the properties or to achieve the anticipated sales price/s.

We mitigate this risk by monitoring the real estate market performance and help our investors to engage them with experienced real estate agents on our panel, to sell their properties.

Taxation risk

There is a risk that the taxation treatment of the investment will reduce the returns received by an investor. Investors should obtain their own advice regarding the taxation implications of an investment in a project.

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Sales Office :- Opens tomorrow 12pm

Phone :- 1300 164 856

Capital Investments & Developments are a residential property developer based in Melbourne, and we specialise in sourcing unique & untapped pieces of land in growth corridors and developing them into quality residential land estates.

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