Real estate investors face a number of challenges that need to be properly managed and require significant time and expertise. When we look at property investment as a sequence of sequential steps, we can divide them into four phases - research, acquisition, operation and sale. Each of these phases requires a time commitment and specific expertise in order to maximise returns and minimise risks. Let's take a look at how we handle these phases at InvestBay so that we are able to provide our clients with the benefits of ownership without all of the hassles associated with such ownership.
Researching and finding the right investment
InvestBay leverages the experience of its founders, associates and contacts to conduct detailed research into markets and potential opportunities. This also includes calculating potential returns and identifying potential challenges and risks which can be very time consuming and/or difficult for individuals to manage. Another benefit is that Investbay’s position as a professional buyer (and in many cases a potential buyer of multiple units) should in many cases help illicit better and faster responses from sellers and other professionals, including more favorable terms than would be available to one-off individual buyers.
As part of the research phase, we also identify, assess and negotiate contracts with potential partners for the acquisition, operation and sale, including local real estate attorneys, accountants, technical due diligence specialists, furniture and equipment experts as well as property managers.
Acquisition and purchase
Although there are many similarities, acquisition processes vary slightly across jurisdictions and properties. Our basic approach in any acquisition is to use our buying power and expertise to secure properties on the most attractive terms while minimizing potential risks. This includes, in particular, looking at all legal aspects of the whole transaction and ensuring that the property has good legal title, i.e. that it is not encumbered by easements and liens.
The ability to think ahead about potential 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, with our partners, also assess the quality of existing interiors and the expected cost and quality of furniture and equipment that needs to be added to ensure the best return on investment for investors. By leveraging our buying power and building longer-term relationships with these suppliers, we are very well positioned to secure superior service levels from our suppliers for the benefit of our investors.
Operation and property care
Effective property management is necessary to maintain occupancy rates, preserve property values and control expenses. Some properties require more management effort than others. For example, short-term rental properties ("STRs" or "Short-Term Vacation Rentals") may experience multiple move-ins and move-outs each month and require more intensive efforts than long-term rental properties ("LTRs" or "Long-Term Rentals").
In general, there are several key operational functions for both types of properties including, marketing, ensuring tenant and guest satisfaction, property maintenance, cost control and reporting.
Similar to the research phase, a significant element of our value-add for the acquisition and sales phases is the experience and knowledge of our team to identify the right partners and negotiate the right contract terms - always with an eye to reducing risk and maximizing potential returns.
A sample of some of the tasks is shown below.
- Manager selection, property leasing and ongoing management - selecting the right property manager and professionally negotiating the details of the contract to minimize ambiguity and ensure clear accountability. Close liaison between the property manager and the Investbay teams (especially asset management & sales/acquisitions teams is essential.
- Marketing and letting - whether it is securing guests for short term holidays or tenants for medium to long term lettings, the property needs to be marketed effectively to reach potential tenants through the right channels. Professional photography, detailed and accurate property information, up-to-date availability and pricing, and the resources and skills to conduct professional viewings and follow up on contracts and offers all need to be carefully managed to maximise return on investment.
- Keeping an eye on key deadlines - ensuring that all key deadlines are properly looked after and met. This includes for example lease expiration/option/extension dates to minimize vacancy and maximize revenue as well as tax payment dates, audit dates, expiration/extension dates for contracts with vendors and suppliers including property managers.
- Pricing - ensuring prices are constantly updated for STRs to reflect competition and specific periods, e.g. busy periods such as weekends, holidays and festivals, and for LTRs when vacancies are upcoming.
- Leasing Agents/OTAs - negotiate competitive terms and provide updated information for leasing agents or online travel agency (OTA) fees.
- Attendance at condominium and HOA meetings.
- Budgeting for opex and capex costs including FF&E and associated project management/architect/designer costs.
- 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.
- Contractors - selecting and negotiating competitive contracts with the most appropriate maintenance and repair providers, cleaners, accountants, tax, legal and other professionals and negotiating competitive contracts for each.
- Late payments - recovery of late payments from tenants etc.
- Insurance - arranging suitable insurance for the property and its contents and any other insurance costs (e.g. title insurance).
- Utilities - managing utility providers and costs including internet/telephone/wifi for STR etc.
- Valuations - ensuring professional and reliable annual valuations and negotiating contracts with property valuers
The last of the key stages of property investment cycle is the sale process. A property owner typically encounters various challenges when selling their property. One of the most significant questions is determining the right price for a property that has been acquired for investment purposes. The owner must conduct a thorough market research, consider the current supply and demand in the area and assess the value of his property in comparison to competitors.
Another important aspect is the marketing and promotion of the property. The owner must effectively raise the profile of his property and reach out to a broad array of potential buyers. A well-presented property with attractive photos and description has a better chance of attracting buyers and selling faster.
The sales process itself also requires effective negotiations with potential buyers. The owner must handle the negotiations and answer their questions and requirements. It's important for sellers to be prepared to defend the price and any discounts, but also to negotiate the terms of the sale, such as payment schedule, financing terms or the time of handover of the property.
Another issue facing the owner is the legal and administrative side of the sale. It is essential to secure all the necessary documents such as the title deed, building permit, energy certificate and others that are required when selling the property. The owner must work with lawyers and notaries to ensure that the sale goes through properly and that all legal regulations are followed.
Last but not least, the property owner must be prepared for possible time and financial complications. Selling a property may take longer than originally planned and there may be unexpected costs associated with repairs, preparing the property for sale or real estate agency commissions.
All of this if handled professionally and correctly leads to a higher sale price and therefore a higher overall return on investment, in which the final price plays a very important role.
And or course, it should be mentioned that if you invest through InvestBay, you don't have to deal with any of these issues and challenges.
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