In the first two parts of our interview with real estate expert Andrew Thompson, we covered investment risks, choosing properties, building a financial model and data quality. In this final part, you will learn how the sale of our properties works, how to keep a clear conscience and sleep well when investing, and what trends await the real estate market in the coming years.
How do you approach the sales strategy, which is a central component of an investment's return?
To start with, I would like to say that InvestBay clients will soon have the option to sell their shares on what is called the secondary market. In other words, to other investors who perhaps did not manage to buy shares during the first offering.
As for the actual sale of a property, we have a whole range of conditions and procedures described in a dedicated document. But we are also flexible. We typically hold properties for five years, but if, for example, we see that it is not a good time to sell after this period, we let investors know and have them vote on whether to postpone the sale.
We expect the sale itself to go quickly and smoothly thanks to how developed the real estate market is these days. In most countries it is possible to sell online, and there are well-established procedures for it. Sometimes we can sell a single unit, other times several properties at once to a single buyer.
Our advantage is that we will have precise data on the property's performance over the past five years. Thanks to that, we will be in a stronger position when selling.
Could you name the biggest mistake people make when investing in real estate?
That would be exactly that browsing of pretty brochures and pictures instead of focusing on data. With every investment opportunity you consider, it is important to go into it with your eyes wide open and not get carried away by the first appealing piece of information. Because that can then lead, for example, to you buying when prices are at their highest. And that reduces your potential profits.
That is precisely why at InvestBay we do all the analyses, go through huge amounts of data and so on. So that we can deliver the best possible returns to our investors.
How should a person invest so that they can fall asleep peacefully in the evening, knowing they have chosen well?
I would like to highlight two possible ways a person can invest in real estate at all. With our approach, you directly finance a property that already exists or is just about to be completed, and you then collect shares from the rent or the sale.
Then there is the second route, where people more or less finance only some business plan. These platforms often offer spectacular returns, but those cannot really be estimated very well, because the project does not even exist yet, let alone has any data about it. Or it is a renovation of an already existing building, but the developer is not particularly experienced and so on.
These projects will be successful if they manage to refinance or sell the project after completion. And those are situations that are very, very dependent on the market, whereas our business plan counts on renting out and selling a building that already stands. It is all about the level of risk.
We try to reduce risk as much as possible while still maintaining an acceptable return on investment. Of course, we too want the greatest possible profit for our investors. But to sum it up, our properties at least already stand and often have some history and data behind them that we can draw on, so that we do not promise the members of our community something that cannot be delivered.
Every property is specific in terms of returns. Some rely more on appreciation upon sale, others on rental income. Those with higher growth potential tend to be a little riskier, because they are harder to predict. But as an investor you can increase your potential return simply by, say, taking a holiday at your property - part of the money comes back to you as your share of the returns, and on top of that you save on the holiday.
Data is very important for our field, and I think its importance will only grow. Along with that, its availability and accuracy should also grow. Because when you think about it, Airbnb, for instance, has only been around for a little over 15 years, and it took quite a long time before this whole new way of travelling took off, so the digital data market is still very young. But various providers and operators with access to data are focusing more and more on regional markets, and they will obtain even the local data that used to be hard to access.
So the ideal thing is to invest in already existing projects for which quality data is available.
How long do you actually hold a property at InvestBay?
At the moment always for five years, but in the future we may also look at shorter or longer periods if it would bring investors higher profits. For example, if a favourable opportunity to sell arises sooner than after five years, and so on.
What changes do you expect in the coming years? What should investors prepare for?
Well, first of all, digitalisation and tokenisation, which we use too. We can already see that large institutions are investing in this concept so as not to miss the boat. At InvestBay we are sort of paving the way, but in five years this could be a completely standard thing on the real estate market. There are even various studies being written about it that say the same thing.
Thanks to tokenisation, InvestBay clients will also be able to trade their shares on the secondary market, for instance. Essentially quite similar to how people buy and sell stocks or bonds today. Today we can see that each new generation is more and more used to trading various assets digitally, for example from their phone. The same awaits the real estate market.
Another thing is so-called branded residences, which are being created in places like Dubai and similar locations. This means that when a real estate project is being developed, a well-known brand, for example a hotel operator, works with the developer from the very beginning, which then allows it to sell units in that residence under its own name. People simply want to know that they are buying something that is under the wing of a well-known company.
And what about travel trends, will they somehow affect real estate investment?
Yes, travellers today pay much more attention to the sustainability and environmental impact of the places where they stay. It is called ecotourism. I see another big trend in that, which at InvestBay we have been trying to capture from the very beginning, for example through our Exclusive Green Resort Zelena Punta apartment complex in Croatia, where great emphasis is placed on recycling, sustainable materials, and where, for instance, motor vehicles are also banned.
I must not forget the trend of working from home, or from anywhere other than the office. Today people commonly rent properties so that they can both relax and work there. I think this trend is not going anywhere, and as a result it will, for example, increase the off-season occupancy of holiday properties.
And holidays themselves are getting shorter these days. Instead of, say, two big fortnight-long holidays a year, it is increasingly common to go away maybe five times a year, but only for a few days. This trend plays right into the type of properties we focus on.
When I look at all of this, at InvestBay we are at a kind of intersection of trends. I think we started at the right time.
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