Basics of Project Management
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b) Give at least three reasons why a client make an investment in real estate.
As the instructed project manager for an office building, you are being asked to analyse the architect’s design concerning economical aspects, by answering all the tasks in this brief.
Task 1.1
In order to know the differences between real estate and financial assets, one must first understand what these assets are. First and foremost, real estate is all of the value-generating properties and commodities owned by the client, being physical items such as lands and buildings on which you can put a specific value on. Such value is determined by various factors like the location, functionality and cost. Meanwhile, financial assets are all those transactional instruments which can be converted into cash. In fact, such assets can be in the form of trade receivables, shares or bonds and are done to represent an underlying value or percentage of the real estate. The difference between the two, is that such financial assets are more liquid when compared with real estate since they can be easily converted into cash. In fact, financial assets such as stocks can be easily sold within a matter of hours while real estate normally takes months to sell. Another difference between the two, is that the actual property may experience depreciation through the years while financial assets may generate more cash flow due to perpetual growth over the years. Needless to say, one must keep that in real estate the client would own the actual land, a land component which will have an infinite lifetime. Also, financial assets may possess a greater risk since the investment being done can’t be physically seen or studied. Finally, one must also keep in mind that the economic cycle is always changing by time (as seen in the image below) and therefore if such investment is to be done, the client must have an idea of the economy’s situation in the near future.
http://smallbusiness.chron.com/financial-vs-real-asset-79865.html
http://www.gulfbase.com/InvestmentTutorial/Section?id=24
http://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch26.pdf
There are various reasons why a client should invest in real estate. These three main reasons are;
Such procedure is considered to be an old practice which is still commonly used nowadays, were the client buys a property and rent it out to a tenant/s. In fact, in such system the client/landlord is responsible to maintain such property in a condition and ensure that all taxes and other fees are also paid by this individual. On the other hand, the landlord will then request the tenant to pay a specific fee to cover all of the cost for maintenance and accommodation. Usually, when the mortgage of such property has been paid, the consequent rents will become a profit to the client.
Unlike the rental procedure, trading involves the buying of property with the intention of holding them for a short period before sell them in order to make profit. Especially when it comes to undervalued properties, a prospective client can make a substantial amount of profit for a low capital investment especially when renovation are done.
Although the previously mentioned reasons can offer a reasonable profit to the client, one must not forget that once an investment is done on a real estate it can offer multiple possibilities to develop such property. Therefore it is very important that when a client is buying a property, one makes sure that such investment can offer such profit possibilities in the future.
http://www.investopedia.com/articles/pf/06/realestateinvest.asp
http://realestate.about.com/od/realestateinvesting/qt/why_invest.htm
Task 1.2
In order to have an optimum office building, one must have a combination of a specific target definition, adequate planning and professional execution from a team having an expert understanding. If adequate planning is used within the timeframe of the office building, it can reduce losses while also saving from the overall cost and time. In fact, such client tasks may include:
Although these are only few of the tasks that fall under project management, for this reason a project manager is appointed on behalf of the client. Such appointment must be done in order to have an individual which can make decisions and report back to the client. Since the office building may require a substantial amount of time to manage, a team of project management must be set up in order to realise the client’s concept. Within the office building the project manager will handle the mentioned client tasks like monitoring of schedule to ensure the deadline date is met, monitor cost to keep in line with the budget, conduct quality assurance to make sure they are within the agreed specifications and also support the client in the remaining tasks. Such procedure must be done to reduce the load or handle those which cannot be delegated by the client.
Slide 68- understand with relation to time cost and quality….
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As the project manager of the office building, it is important to have a number of skills that ensures one can be comfortable with the specific project type and responsibilities associated with it. Such responsibilities may include process organisation, target definition, planning process and construction implementation. The project manager has to be able to give the best advice to the client, while building a healthy communication with the architects and specialists found within the project. Furthermore, by clearly defining the ‘Target Definition’, the project manager will ensure that all phases are done one after the other in the smoothest way possible. More importantly, the project manager must be also a generalist within the client’s organization in order to handle both the stages of the project and participants involved. A generalist project manager, will have enough experience to know that when involving participants at the early stages of the project they will put their knowhow and transmit their information to achieve a better overall outcome. Furthermore, such project manager will be able to look into the various project processes and create specific management functions in order to integrate the planner’s objectives with the demand of the executing companies.
CHECK WHETHER TO ADD SPECIALISTS
https://www.linkedin.com/groups/Project-Manager-Specialist-Generalist-37888.S.204373857
think about cost implication…remember the balcony alteration in midi project
Task 1.3
During the project leadership and project controlling of the said office building, one can decide to choose either line or staff function.
Line Function
In this system, the hierarchical structure starts with the client and continuous with the other participants involved within the project. Since our office building is relatively complex, the client may not be able to manage all tasks and so, by assigning a project manager he will be responsible to handle the various client’s tasks. This will give a good idea of the project’s management requirements since they can directly impact the outcome of the project. Such client’s tasks are;
Such procedure, may also be adopted when the clients does not have a certain management knowhow. In such cases the engaged project manager will act as a “Temporary CEO” and represent the client in various managerial functions especially when it comes to the control of planner and executing entities.However, one must keep in mind that the project manager will still report to the client’s request.
Staff Function
On the other hand, within a staff function the client no longer has the ability to act as the primary deciding role but now he has to report to the project’s consultants. This system gives the client the responsibility to control this project (office building), however constant reporting must be made with the project manager. Add someting
Task 1.4
In large scale project
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