Introduction
The details provided elaborate an ambitious real estate investment plan that Lance Johnstone and Corey Galloway wish to undertake. The project has the potential to succeed and also fails to owe to the issues and the circumstances it is encountering. However, the fate of the project is largely dependent on the decisions that Lance and Corey make. The real estate industry has encountered various challenges owing to a fall in demand and the ongoing economic crisis. This puts in doubt whether this would be the best investment to make. Below is a SWOT analysis of the proposed project.
Strengths
Real estate is a good choice of investment since it provides returns constantly. Unlike other investments like securities, it is not vulnerable to drastic depreciation. The value of securities is largely dependent on the performance of companies and speculation in the capital market. The value of real estate investments only reduces drastically in extreme cases such as the case of a recession. Lance and Corey have identified a location where there will be a constant demand for housing.
The location is 3000 North Broad Street, Philadelphia. The location is near a learning institution that is expanding rapidly. The expansion of the institution culminated in a sustained and expanding demand for housing. This presents a good opportunity to invest in housing. A key strength of this project is the nature of the real estate. Investments in this sector are safer than most other ventures owing to the constant returns they provide. Although they may not provide the highest rates of returns based on the investments made, the margin of an investor incurring losses is minimal.
Opportunities
Every investment should be triggered once an opportunity is identified. In this real estate project, the opportunity pertains to the demand for housing. 3000 North Broad Street, Philadelphia is an area near educational institutions that are expanding rapidly. The present housing cannot support the students’ population. This has created a housing gap that Lance and Corey want to exploit. Additionally, there are dilapidated housing projects that Lance and Corey can purchase and develop. These situations have provided opportunities that can enable the fulfillment of the project.
Weaknesses
Despite the project being a shrewd idea, it has some weaknesses. With the falling demand for a real estate property, many people are shying away from this sector. The implication of this is that the housing units developed may not have customers to buy or rent. This would reduce the profitability of the project. Lance and Corey seem not to have planned appropriately. Planning is vital since it gives the investors a strategic advantage when undertaking such a project.
In this project, Lance and Corey seem not to have factored in the fact that some of the costs will increase resulting in an overall escalation of the total project cost. Additionally, their forecast on returns is not accurate enough to satisfy the banks that may finance the project partly.
Threats
The key threat is the pulling out of banks that are supposed to provide a substantial amount of funds. The two banks seem to have doubts about the success of the project. Consequently, they are assessing the situation closely and thoroughly since it presents a major risk. Another threat to the project is that Lance and Corey will require collateral for the loan they obtain from the bank. If the project is undertaken fully, the payment of interest and the principal amounts will dilute the earnings receivable by the two investors.