Real estate investors face a number of problems that need to be properly managed and that require considerable time and expertise. When we look at investing in real estate as a sequence of successive steps, we can divide them into four phases - research, acquisition, operation, and sale. Each of these phases requires a time commitment as well as specific expertise in order to maximise returns and minimise risks. Let's take a look at how we handle these phases at InvestBay, so as to provide our clients with truly worry-free ownership of all that goes with it.
Research and finding a suitable investment
InvestBay draws on the experience of its founders and collaborators and their contacts to carry out detailed research of markets and potential opportunities. This includes, in particular, calculating potential returns and risks, which can be very time-consuming for an individual. Another advantage is that our position as a professional buyer (and in many cases a potential buyer of multiple units) helps to compel better and faster responses from sellers and other professionals, including more favourable conditions.
As part of the research phase, we also identify, assess, and arrange collaboration with potential partners for acquisition and sale, including local real estate lawyers, accountants, technical due diligence specialists, furniture and furnishings experts, as well as property managers and operators.
Acquisition and purchase
Although there are many similarities, acquisition processes differ across various jurisdictions and properties. Our fundamental approach in any acquisition is to use our purchasing power and expertise with the aim of securing properties on the most attractive terms possible while at the same time minimising potential risks. This includes, in particular, watching over all the legal aspects of the entire transaction and ensuring good legal title, i.e. that it isn't encumbered by easements and liens.
The ability to think ahead about possible problems and the confidence to ask the right questions of the right people are an essential part of InvestBay's added value for our investors. As part of the acquisition process, we also assess the quality of the existing interiors and the expected costs and quality of the furniture and furnishings that need to be added, in order to ensure investors the best possible return on investment. Thanks to using our purchasing power and building longer-term relationships with these suppliers, we are very well positioned to secure an above-standard level of service from our suppliers for the benefit of our investors.
Operation and care of the property
Effective property management is necessary to maintain occupancy rates, preserve the value of the asset, and control expenses. Some properties require greater effort to manage than others. For example, with short-term rental properties (STR, or "Short-Term Vacation Rentals") there can be multiple arrivals and departures every month, and they require more intensive effort than properties intended for long-term rental (LTR, or "Long-Term Rentals").
Generally speaking, with both types of property there are at least four basic operational functions - marketing, ensuring the satisfaction of tenants and guests, property maintenance, and cost control and reporting.
Similarly to the research, acquisition, and sale phases, a significant element of our added value is the experience and knowledge of our team, which makes it possible to identify the right partners and negotiate the right contract terms, always with a view to reducing risks and maximising potential returns.
A sample of some tasks is given below.
- Selecting a manager, renting out the property, and ongoing management - choosing the right property manager and professionally negotiating the details of the contract with the aim of minimising ambiguities and ensuring clear accountability. The connection with the property manager is crucial, and the property manager works closely with the asset management team.
- Marketing and rental - whether it's securing guests for a short-term holiday or tenants for a medium- to long-term rental, the property must be effectively brought to market and reach potential tenants through the right channels. Professional photographs, detailed and accurate information about the property, updated availability and prices, and the resources and skills for carrying out professional viewings and subsequently tracking contracts and offers - all of this needs to be carefully managed in order to maximise the return on investment.
- Watching key deadlines - ensuring that all key deadlines are properly watched and met. These include expiry dates, options, rental contract extensions, in order to minimise vacancy of the premises and maximise income, tax payment dates, inspection dates, the expiry and extension dates of contracts with suppliers including property managers - and a number of others.
- Pricing - ensuring constantly updated prices for STRs, so that they reflect the competition and specific periods, e.g. busy periods such as weekends, holidays, and festivals, and for LTRs in the case of upcoming vacancies.
- Leasing agents/OTAs - negotiating competitive terms and ensuring updated information for leasing agents or fees for online travel agencies (OTAs).
- Attendance at meetings of housing cooperatives and unit-owners' associations.
- Drawing up a budget for opex and capex costs including FF&E and related costs for project management, the architect, and the designer.
- Equipment - selecting the right equipment including software and services, e.g. air-conditioning monitoring, noise monitoring, information-provision services, remote-access locks, camera-monitoring services, etc.
- Suppliers - selecting and negotiating competitive contracts with the most suitable providers of maintenance and repairs, cleaners, accounting, tax, legal, and other professionals, and negotiating competitive contracts for each of them.
- Late payments - recovering late payments from tenants, and the like.
- Insurance - securing appropriate insurance for the property and its furnishings and, where applicable, other insurance costs (e.g. title insurance).
- Utilities - managing utility providers and costs including internet, telephone, wifi, and the like.
- Valuation - securing professional and reliable annual valuations and negotiating contracts with property appraisers.
Sale
The last of the key phases of investing in real estate is the sale. A property owner encounters various problems and challenges when selling their asset. One of the most significant factors is determining the right price of the property, which was acquired for an investment purpose. The owner must carry out thorough market research, consider the current supply and demand in the given location, and assess the value of their property in comparison with the competition.
Another significant aspect is the marketing and promotion of the property. The owner must effectively make their offer visible and reach potential buyers. A well-presented property with attractive photographs and a description has a greater chance of capturing the interest of prospective buyers and selling faster.
The sale process itself also requires the right handling of potential buyers. The owner must master the negotiation and answer their questions and requirements. It's important to be prepared to defend the price and any discounts, but also to negotiate the terms of the sale, such as the payment schedule, financing conditions, or the time of handover of the property.
Another problem that the owner faces is the legal and administrative side of the sale. It's essential to secure all the necessary documents, such as the title deed, building permit, energy performance certificate, and others that are required when selling a property. The owner must work with lawyers and notaries to ensure the proper course of the sale and compliance with all legal regulations.
Last but not least, the property owner must be prepared for possible time and financial complications. Selling a property can take longer than originally planned, and unexpected costs associated with repairs, preparing the property for sale, or commissions for real estate agencies may arise.
All of this, if it is conducted professionally and correctly, leads to a higher selling price and thus to a higher overall return on the investment, where the final price plays an important role. And especially if you invest through InvestBay, you don't even have to deal with any of the above.
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