Back in the 80’s and 90’s negative gearing was the buzz word. People like Jan Somers made themselves famous through the promotion of negative gearing and real estate agencies rolled out sales on this specific basis.

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In a nutshell, negative gearing means the cost of your loan interest costs, and property holding costs, are greater than your income, and as such that loss can be offset against your salary to reduce your personal tax.

I’m not a fan of negative gearing for a few reasons –

1.    Job security is critical to being able to actually fund the losses on the property and the world has changed very much since the GFC and COVID, and job security are almost two opposite words

2.    It’s still cash flow. Yes, you get a tax refund at the end of the year, but you still need to fund a cash flow loss every month.

3.    It all depends on Capital Gain. The upside with negative gearing is when you get good capital gain you can sell for a profit or refinance and take some equity out, or fund the purchase of another property (negatively geared). Again, since the GFC lending criteria has changed dramatically and loan to value ratios are not what they used to be.

4.    Politics – Negative gearing has been tossed around many times and Labour has proposed it should be scrapped. I think it’s only a small chance it could be scrapped because it’s a political hot potato, but it can be legislated away at any time.

In summary, I’m not saying negative gearing is bad but it has a lot of risks and you need to be incredibly careful and confident about your security of income to head down this investment path.

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Services OLD

Feasibility Analysis is only the start of project viability analysis. Financial Modelling takes the feasibility to the next level and understands how cash flow, and different funding structures, can improve return on equity, all within the parameters of a particular client’s investment strategy.

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Feasibility Analysis is a critical tool and it has many pitfalls. Understanding not only project costs, but also financial markets, macro and micro economic projections, and cash flow analysis, are essential skills in the analysis of a property development or investment.

Feasibility Analysis in early stage due diligence is based on significant assumptions that impact the financial outcomes. If you don’t have access to relevant data and experience, then wrong assumptions lead to bad financial decisions.

We provide uniquely detailed, property development, feasibility and financial analysis, through our bespoke software that has been developed throughout our 30 years’ experience in the property industry.

With our analysis you can reduce property development and investment risk, attract equity partners, and negotiate strong project funding structures.

We provide the financial analysis you need to make informed decisions on your property assets.

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2021 was not what any of us expected, I’m sure. From COVID19 lockdowns, to trade shortages, construction cost rises, tightening investment yields and rising houses prices….one thing is for sure, the year wasn’t boring.

So, what did we learn?

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At the start of 2021 I looked towards an uncertain year of further COVID lockdowns and subdued markets, however the best example of human personality has come to the fore this year, and that is the ability to allow familiarity to breed contempt.

COVID has become part of our lives and as we have reached the 80% and 90% vaccination marks the politicians calls for lockdowns are starting to be seen more as political scaremongering rather than a genuine concern for the public’s health. Don’t get me wrong I am not dismissing COVID, and I am pro-vaccination, but at some point, we need to start to live and trade again. It is easy for politicians and bureaucrats on government wages to enforce lockdowns when they are not the ones whose livelihoods are at risk.

A surprising and critical aspect that has come to the fore though is that the last 12 months of lockdowns has seen both personal and corporate savings and equity positions improve. Of course, they have improved through a lack of spending which has devasted retail businesses. However, that has led to two things-

1. Increased spending and investment ability which has boosted property markets

2. A willingness to chase and invest in blue chip assets at historically low yields

When you combine these two elements with COVID’s impact on the supply of steel and other building products, due to reduced shipping capacity around the world, then we are seeing increased costs and increased property demand. It is of course also starting to drive inflationary fears.

That’s all great (even the inflation is not that bad) but let’s not lose site of the fundamentals of economics. What goes up must come down. What is historically low now (interest rates and yields) can only go up. Economic growth is good and at the moment this mini boom is coming off the back of an exceptionally low base, so the lesson is to be diligent in your property development and investment decisions in 2022. Clearly understand your investment strategies and stick to them, don’t speculate. Do your due diligence, don’t guess. If you stick to the core principles, then there is significant opportunity in 2022. If you don’t and you want to speculate then you may win big…or you may lose big.

Whichever way you go I hope you all have a wonderful Christmas and that 2022 is a momentous year for you all.

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Don’t confuse Project Delivery with Project Management. Here is why you need to understand the difference.

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Project Delivery is a holistic approach to property development, encompassing a clear understanding of the client’s investment strategy. Project Management is the process of delivering a construction project.

In our opinion, Project Delivery should include the following key elements. Here’s what to look out for when engaging a Project Delivery Team for your next project –

• Development Management

  Development Management involves sourcing, analysing and leading development teams through the complete property development process.

  You should be able to rely on your project delivery team to ensure the project is managed proactively, is risk managed, and provides the best possible returns on your investment.

• Project Management

  Your project delivery team should have significant experience in leading and managing project time, scope, cost, and outcomes across all aspects of the project through to completion and handover.

  The primary goal of project management is to provide solutions that are proactive and risk averse to ensure your investment returns are maximised.

• Construction Superintendent

  If you choose to engage a Construction Superintendent, they should be QBCC licensed, AIPM registered, and highly experienced to act under all Australian Standard contracts. The superintendent will manage all aspects of the contractual arrangements between you and the principal contractor to ensure your investment is risk managed and provides the best possible returns.

• Independent Project Auditor

  An Independent Project Auditor is engaged on behalf of developers, principal debt funders, and joint ventures, to proactively oversee risk and outcomes for a range of development projects.

  The role of the independent project auditor is to oversee risk and project management methodology to ensure the project is as successful as it can be.

Rosel Sherwood have over 35+ years of experience in Project Delivery and all of its key elements. We take pride in delivering a holistic approach to our clients, to get them the best possible results and return on their investments.

Get in touch with us today to see how we can help you deliver your next project.

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Of course, interest rates will rise. But when and why?

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The RBA had been talking about no rate rises until 2024. Now they are making noises about 2023 and expressing concerns about inflation. APRA have just raised the “home loan assessment buffer” from 2.5% to 3.0%.

Inflation is being driven primarily by –

• New house construction partially driven by new homeowner grants to stimulate the economy

• Growth in demand for established housing driven by increased household savings due to COVID lockdowns, and a low price base (in regional locations)

• Supply of steel and timber construction products because we import most of pour manufactured products and there are less cargo ships in the ocean due to COVID impacts

• International shipping companies are doing the same as airlines and moving shipment dates and reducing shipping routes until they have full ships, rather than keeping to scheduled times and losing money with half filled cargo

• A surge of spending, especially on travel, once COVID lockdowns are removed and this will drive another sector of inflation

They key for me is that the RBA don’t overreact. COVID has reset the baseline on spending and as we come out of COVID of course there will be a surge in inflation… the question is, will this be a sustained surge or is it a correction back to the norm?

The problem is, since the GFC, there just doesn’t seem to be a “norm” any more.

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There is an air of confidence around Southeast Queensland over the next 10 years leading up to the Olympic Games, and rightly so.

Are you and your property assets positioned to take full advantage?

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I am hearing a lot about capital growth, development opportunities, and general good times to come. If there is one thing I have learned over 30 plus years (and a GFC) in the property industry, is that opportunity is available only to those who are prepared.

What do I mean by that?

Property is a highly capital intensive industry and despite the good times ahead we are never going back to the heady pre-GFC days when anyone could get a loan for anything. As such, to be ready to take advantage of the coming boom you need one of two things in place (and preferably both) –

1.    Low gearing and strategic asset holdings. This means assessing what is in your portfolio now and consolidating to ensure you have available equity in strategically placed assets that meet the criteria you want to achieve.

2.   Available cash equity or solid liquid assets.

Have a good look at where you sit and be ready. If you’re not you’ll just be left behind by the people who are.

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One of the changes coming is in fact not new, but is a return to ways of the past. Our household will become multi-generational as children stay home longer and ageing in place becomes the norm as services to the elderly improve. These changes are being driven hard now by pure economics.

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Here are 3 examples and benefits of Generational Housing –

Student Accommodation – Education is becoming more expensive. Casual work that University students often engage in has been greatly affected by COVID-19. This all adds to the cost of living and increases the stress of the student years. Adding a secondary dwelling to the family home offers an alternative for parents to provide security with independence for their children and an opportunity to help them financially through these years. It allows young adult children to study and stay at home, but still maintain independence.

Aged Living – The term “Ageing in Place” has been part of the greater health care system for many years but the alternatives for this are limited. Children of elderly parents either put their parents in a home or have them come and live in their house. One is not desirable to the parents, and the other is not desirable to the children. Adding a secondary dwelling to the family home gives both the ageing parents and their children the independence they still crave, yet also provides the security and comfort that loved ones are close and are well taken care of.

Child Care – In the majority of families both parents need to work. As such, Child Care becomes an expensive necessity during those early family years. The cost of childcare in today’s society either has couples delaying having children, or having a child but mortgage pressures mean they have to go back to work so the child goes into childcare. In childcare, the bond of ‘family’ is lost in those formative years and people end up working just to pay childcare fees. An extension of the aged living concept is that grandparents can provide at home childcare for families. Grandparents provide the best emotional childcare available and the most cost effective. This is also great for the grandparents’ emotional state. Parents have far less worry about their child when at home cared for by grandparents and it saves them significant money on childcare. The modern ‘nuclear’ family has lost the benefits of the wisdom of age. Grandparents can interact with their grandkids which keeps them feeling younger. Grandkids can interact with their grandparents and get a richer perspective on life as they grow up.

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Wealth Creation through Opportunity. I see an era where the average homeowner will become (through necessity) more educated about how to maximise the value of their existing dwelling and land.

Consultancies are already growing up around this issue, which are driven by the need to maximise value of the traditional home.

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Traditionally the family home stays in the parent’s name until they enter a retirement home where it is used as equity to fund retirement, or they die and then it is left in the will to the children who sell it and share the spoils.

These traditional ways are changing in many ways.

• Retirement Funding – The traditional family home should be a source of retirement funding through the progressive development of land over time, with additional density. Unlocking value all whilst remaining in the family home for longer.

•  Development Profit – Homeowners will become more educated in developing their own land. There are significant economies of scale for people who have owned their home for some time. By understanding how to do this they will reap greater rewards, rather than just selling to a developer.

• Affordability – The cost of living is increasing exponentially every year. As a homeowner with a mortgage, adding a “granny flat” or some additional density can provide additional rental income from the property that can assist with mortgage payments, yet without compromising privacy and independence.

• Create Savings - Adult children are staying at home longer these days and a secondary dwelling can provide them with a sense of independence and allows them to save money towards their goals much quicker than paying rent in the normal marketplace.

• Investment Return – Additional density can add value to the traditional property and create extra income that can be increased in stages over time.

• Value Increase – And through this progressive development the extra income source to your property increases its valuation.

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We are seeing the start of a massive change in the way we house ourselves and our families. It is a swing back to the more traditional extended family arrangement, or at least a more dense use of land…but with the ever present demand for privacy and independence.

 This does not mean more units in increasing high rises…and it can be achieved.

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Since the GFC and now with the economic uncertainties of COVID19, the property market has changed significantly.

 Affordability is getting further and further out of reach for young people as the cost of housing increases greater than wages growth.

 Whilst rentals are continuing to rise this makes saving for a deposit more difficult and the dream home versus available budget means you either compromise design or delay that new home for longer.

 Whilst interest rates are low, lending criteria has become more restrictive and approvals more difficult to achieve.

 Higher education is becoming more expensive.

 Work from home is becoming a reality thanks to COVID19.

 Aged living is becoming more expensive and less desirable as “ageing in place” becomes more desirable.

 The cost of living is increasing.

 The cost of childcare is increasing.

 Electricity costs are increasing.

 …It all sounds dramatic, and there is a strong argument that it is. But we are starting to see the green shoots of change. The discussion around affordability has been had for years but in the end, there is only so much reduction of scope and quality that is acceptable to the market. The change that is coming is structural, it will change the core of how we view families and how we view growing up and ageing.

 In this 5 part series we’ll explore what the term GENERATIONAL LIVING really means.

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Services OLD

In Property Development, Investment, or any Business for that matter, you need to start with the end in mind.

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Now more than ever you need to understand where you are going with your business or your investments. Is it simply a matter of investing some cash for either a secure return from a business or property, or to get a quick development profit?

No.

The days of “build it and they will come” could not be further away. I remember being involved in property development in the late 90’s and it seemed you could develop almost anything almost anywhere, and it was more about how much profit you would make, not “if” you would. Now I know that is a generalisation but with the certainty that experience brings I can assure you, it could not be more different.…and the way things have always been done, will not cut the mustard anymore.

If you’re developing, who are you developing for? If you answered “owner-occupier” or “investor” then I’m sorry to say you are falling behind. You need to be far more niche. You need to understand what your buyer really wants. Understand their lifestyle problems. Understand their financial problems. Then look to solve those problems.

To make it in business these days you have to break through all the noise. Everyone is an expert and unique…just ask them. But can you truly say you understand what you are delivering because you truly understand your target client?

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Maybe I’m showing my age, but Jim Rohn was and still is, one of my go to teachers for business motivation and strategy. If you haven’t heard of him, look him up. He is as relevant today as ever. Following is a short article from Jim about being curious and how to observe your industry.

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We must never allow a day to pass without finding the answers to a list of important questions such as: What is going on in our industry?

What new challenges are currently facing our government? Our community? Our neighbourhood? What are the new breakthroughs, the new opportunities, the new tools and techniques that have recently come to light? Who are the new personalities that are influencing world and local opinion?

We must become good observers and astute evaluators of all that is going on around us. All events affect us, and what affects us leaves an imprint on what we will one day be and how we will one day live.

One of the major reasons why people are not doing well is because they keep trying to get through the day. A more worthy challenge is to try to get from the day. We must become sensitive enough to observe and ponder what is happening around us. Be alert. Be awake. Let life and all of its subtle messages touch us.

Often, the most extraordinary opportunities are hidden among the seemingly insignificant events of life. If we do not pay attention to these events, we can easily miss the opportunities.

So be a good observer of both life and the world around you.

- Jim Rohn

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There are many factors and methods of investment that come into consideration when discussing Property Wealth. Part 3 of this series takes a look at Flipping Properties.

Part 3 - Flipping

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The term “Flipping” received a lot of press a few years back and made somewhat of a resurgence in the last few years. It means purchasing a property, making strategic capital improvements, and then immediately selling for a profit. Whilst much of the focus was on small residential opportunities, it had been extended to commercial and industrial properties as well.

Here’s why I don’t like it…

Property is not designed to be a liquid asset. As we discussed in a previous blog, governments long ago recognised the income potential of property and slugged it with stamp duties and taxes. Also regulations surrounding the transfer of property are a drag on its time based liquidity.

Property transactions are also much larger in capital and require structured funding arrangements in most cases, which also takes time.

Having said that, property is therefore not subject to the hour by hour changes in value that the stock market has, but as a slow burner it takes time to achieve capital growth.

I’m not saying flipping doesn’t work…what I am saying is that it can be a subjective argument about which property, and what capital improvements, will constitute a successful Flip, and when you start making subjective decisions on big capital investments then you start to slide towards greater risk.

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There are many factors and methods of investment that come into consideration when discussing Property Wealth. Part 2 of this series takes a look at Cash Flow & Capital Growth.

Part 2 - Cash Flow or Capital Growth

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Investing with a Cash Flow mindset or a Capital Growth mindset can represent different types of property assets. Obviously, the ideal asset produces both value factors, however this is not always the case, and they can be mutually exclusive.

Cash Flow is represented by the location and exposure, its acceptance and useability by prospective tenants, and the ability of that property asset to bring efficiency and profitability to the tenant’s core business.

Capital Growth can also be produced by a factor of location, but in a less immediate sense. Capital Growth can be produced by assets that are on the verge of zoning changes, or on the verge of gentrification. Gentrification can be a reflection that the current improvements no longer serve the needs of that area but that a higher and better use is imminent.

Capital Growth can also be factored into how tenants’ leases are negotiated, including such factors as percentage or turnover rents. In the right location these can produce better than market rent increases annually, which produces strong investment interest and hence stronger capitalisation rates.

Look closely at the following key factors that play into your property assets –

·       Location

·       Relevance of the current improvement to surrounding areas

·       Location of competition

·       Location of generators

·       Future zonings

·       Ease of converting existing structures to alternate uses

How does your property asset stack up?

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There are many factors and methods of investment that come into consideration when discussing Property Wealth. In this 6 Part series we’ll look at a few.

Part 1 – Liquidity (or lack thereof) of property assets

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One major question when considering investment types, is the liquidity of the asset and the equity therein. Property is the most illiquid of the major asset classes. Unlike shares it cannot be traded quickly as it is constrained by much red tape around the asset. Successive Governments have also seen the great value in property as a source of taxation, through stamp duties, land taxes, infrastructure charges etc. This has added to the illiquidity of property, as the cost of transacting an asset is high, and that cost must be recouped from increased capital value.

Having said that, for all its lack of liquidity, property also comes with a level of stability. Stability in terms of an asset that is physical in nature. An asset that is backed by the quality of the tenants that occupy the space and pay rent, on longer term leases, that give confidence in income. This then gives comfort to financiers who are willing to lend higher debt ratios against property than they would against a business or shares.

What this all means is that you should always look at property as a longer term investment. I always ask the question before purchasing a property asset, and especially a development site, if everything turns pear shaped in the economy, would I be willing and able to hold that asset for the next 5 years?

If however your strategy is speculative, and you are looking for quick capital gain, then this to me is the same as gambling. You’ll win some and lose some.

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Rosel Sherwood is a boutique and highly experienced property industry expert.

The Directors John Rosel and Chris Sherwood have over 30 years’ experience in the Property Industry and are a provider of Property Solutions & Outcomes.

Meet John & Chris…

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In the quest for affordability one of the interesting developments has been that of the “Tiny” house. But what is it, and is there room for it in the marketplace?

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The days of Australians aspiring to the quarter acre block of land, 4 bed, 2 bath, 2 car house, have not only passed, but have almost become myth. Affordability is the buzz word, but what that looks like has yet to be defined. You can only take so much out of the scope of a house before it ceases to be a “home”, and you can only subsidize rent so much before it becomes a poor investment.

The “Tiny” home has been around for a few years and has never really been a mainstream product, but where it is starting to gain ground in recent times has a lot to do with the GFC and the impact on peoples’ willingness to spend and fears about the future. Some things that are changing are –

·        Decrease in finance availability and increase in cash deposits required for buyers

·        The search for extra cash flow to help with the mortgage

·        Children staying at home longer than the generation before

·        Aged care and the drive to “age in place”

These issues have led people to investigate how they can add value to their home and how they can cater to the needs of their family and this has led to things like Granny Flats and Fonzie Flats. But where the “Tiny” home differs is in its innovation in space design, and I think most importantly, its sense of individuality. The Tiny home can be a home on its own, set apart from the existing home, and with some innovative design, have its own sense of space.

So…yes…there is room for the Tiny Home, especially where it adds value to an existing property, and services the needs of families that have been trending back towards the extended rather than the nuclear.

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When I was growing up in Cloncurry in the 1970’s, I remember people complaining about how the kids were all leaving town to go to the cities on the coast like Cairns and Townville. But now I hear the same complaint and see that the kids are leaving the likes of Cairns and Townsville to go to Brisbane for work and lifestyle.

So why invest in the regions?

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The regional areas of Queensland do have a lot to offer economically and in terms of lifestyle.  Regional property prices are significantly lower and can create a more affordable lifestyle than the metro areas. Lifestyle is more relaxed and worker efficiency is much higher without hours wasted in traffic every day.  With the recent changes due to Covid19 and the work from home movement, these factors are an opportunity for major employers to grasp onto.

The regions are home to most of our country’s natural resources.  Ports such as Townsville and Mackay offer exceptional Port facilities to access south-east Asia.

But this all means diddly-squat if infrastructure and policy do not keep pace with changing times.  The regions need reliable baseload power to enhance our mining and even manufacturing possibilities.  Water security and irrigation water are critical and have the potential to open up vast areas of regional Queensland to sustainable farming practices.

Policy directions such as fly-in fly-out workers (FIFO) needs to be changed. Much FIFO now happens out of Brisbane and it should be a stronger condition of approval that workers are located where they work.

So yes, the regions are worth investing in…but do our policy makers believe the same?

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Services OLD

If property is the body then finance is the bloodstream. Since the GFC and now with Covid19 the funding stream has a bad case of blockage and is threating the industry as a whole.

What can we do?

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In simple terms property finance (both development and investment) is made up of two components, Debt and Equity. Equity can subsequently be split into different sources including –

·        Mezzanine funding

·       Preference Equity

·        Asset Equity

·        Cash Equity

After the GFC the biggest issue facing the industry was that Tier one banks reduced their Loan to Value Ratio’s (LVR) from around 80% to around 60%. That extra 20% must be made up in the equity component. This led to an increase in Mezzanine Funding arrangements.

Now mezzanine funding must be treated with respect. It is expensive at anywhere between 12% to 20%, but is attractive when compared to returns on equity of 40%. However mezzanine funding can chew its own head off with capitalising interest if left too long. Mezzanine funding works for a commercial project with committed quality tenants, which allows a reasonably quick sale on completion. I do not recommend it for residential projects that rely on sales of residential apartments or houses to clear debt. For example compare a fuel and fast food project to a 12 unit complex. Simply put, the fuel and fast food requires one buyer to clear debt and create profit…the residential project requires 12 separate buyers.

In saying that Mezzanine Funding is a critical medicine for the industry, but it is treating the symptoms and not the cause. The cause however is inherent in the market forces approach to our capitalist economic system. Now I’m not saying that our finance system is broken or that there is a better way of doing things. What I am saying is that education is the key. Understand how the system works and make it work FOR you not AGAINST you.

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What measurement of development return is better and why?

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ROC (Return on Cost)

This is simply the net project profit divided by the total development cost. It is generally the first “go to” measurement that most developers look for. Whilst each project is different and ROC is subject to individual project risks, generally a bankable return would be a minimum of 17.5%. One of the greatest pitfalls of inexperienced developers is not including all development costs in this calculation. I have reviewed many feasibilities over the years that have suggested 25% or more returns…I can assure you this only happens under extraordinary circumstances and is not an industry norm. Quick rule of thumb…if your first run feasibility is 20% ROC or greater, then an alarm bell should ring and you need to check your figures very carefully.

ROE (Return on Equity)

This is the development profit divided by the cash equity in the project. To me this is a more meaningful figure as it’s the return on your own cash that is the creator of wealth. This figure is highly dependent on the finance structure of the project. Increased principal and mezzanine funding of a viable project, will increase the return on equity because the profit is similar but the equity portion is lower. However there is increased risk as debt increases, the more debt the quicker the development needs to be sold through and profit realised. There have been many “creative” ways over the years to increase ROE, which is ok, but you must understand the development as a whole and the financial structure implicitly, otherwise stay within traditional parameters.

IRR (Internal Rate of Return)

This is the measure of a return on a project over time. IRR’s are thrown around willy nilly by many developers just to look smart…I’m serious. But ask many of them how an IRR is calculated or what does it really show, and they come up with the standard textbook response.

In simple terms, the longer the project period the more informative IRR is. I do not believe IRR for a project less than 2 years is a meaningful measure and can often be misleading. Even up to 5 years it has limited value. IRR is valuable for projects longer than 5 years and for large investment properties to be held for minimum 5 year periods, and asset portfolios as a whole.

What you need to understand is that IRR is based on future cash flow, so therefore by its very nature is full of assumptions. Assumptions can of course be manipulated to achieve desired results. Assumptions also change.

So there is nothing wrong with an IRR measurement for a 5 + year project with multiple income and expense streams, however assumptions need to be clearly understood, and these assumptions must be revisited every 12 months as a minimum to identify market movement and ensure the project remains on track.

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As we said in our last newsletter, Project Management is about the management of people and personalities. Because there are different types of personalities, there are of course different types of project managers and different styles of management.

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Reactive

Otherwise known as crisis management. Lurching from one problem to another with never enough time to get on the front foot. This is caused by not taking the time to set the project basics in motion at the start. It is compounded by a lack of proactive follow up of tasks that require completion by stakeholders.

Force

My way or the highway. The project manager who tries to get what they want by threatening and contractual coercion. Whilst I acknowledge there comes a time when a good bollocking of a stakeholder is well deserved and has the desired effect, it is very rare. Generally this style of Management is a symptom of the Project Manager who has difficulty accepting change. As a Project Manager if you can’t accept and deal with change in such a dynamic industry as property development….then find another career.

Responsibility

This one is my favorite. The old ‘It’s not my problem’ attitude. Sorry to say but as the Project Manager EVERYTHING is your problem because you have been engaged by the client to make sure the project is delivered. I recently was in a meeting where a Project Manager from a national company, working on a very large retail project, said to the builder “I don’t mean to be harsh...but not my problem”. So instead of working with the stakeholders to get an outcome, he just looked to lay blame at the end of the project on who didn't do their jobs. What a waste of time and money.

  Big Picture

It’s important as a project manager to keep your eye on the big picture. It is easy for some to get caught up in a particular area of the project they like or know well and forget about the ‘Big Picture’. However there are also the project managers who take such a ‘helicopter big picture’ view that they are so far above the project they can’t see what is going right and what is going wrong. This then leads to Reactive management.

Proactive

It seems logical to say a good project manager is a proactive one but being proactive to many PMs seems to mean addressing an issue as soon as it arises and getting a resolution quickly.  No, being proactive means understanding the process, understanding the scope of works every member of your Team is required to perform, having a clear and detailed program of critical milestones, and a system of project management that identifies Risks before they become problems, and actioning a system of mitigants that aim to reduce the risk to the overall project before any risk events occur.

As a Project Manager you can’t do all this on your own, you need specialists in each field to bring all this together, but it is your job to manage those consultants in a proactive manner, ensuring that what they are delivering is on Time, within Budget and Scope, and is all aligned with the ultimate goal of the Project outcomes.

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