Crisis. Bad investments. Ruined plans. Pandemic. 2021 is indeed a year of difficulty. Businesses and industries are in deep trouble.
And yes, the real estate industry is on the verge of falling after a year of constant decline in profit and revenue. Even before the pandemic, strategic plans are in action. However, the pandemic has turned the game around making most industries worldwide lose their capacity to stand in the market.
Yes, investment strategies are on the move but it does not mean that everything will be successful. Value add strategy on real estate has a great impact on the success of most estate businesses in Europe and all over the world. Despite the challenges of the pandemic, investors rely on value add strategy to remain standing in the market. Moreover, the other two strategies can also mitigate the existing crisis – core investment and opportunistic approach.
Successful estate companies have a different story to tell. Revenues continue to rise, profits are successfully met, and plans are always in action. To say, most successful estate businesses have their plans on how to mitigate declination in the market. After all, a successful business always starts with a plan. Check the game-changing plan for a successful real estate industry below:
One – Value Add Strategy and Investment
One must know that each property or estate has its value and core. It is very important to know the reason behind an estate. Also, it is vital to consider its economic factors and benefits to avoid losses after investing.
Value add estate strategy focuses on properties that have a great in-place cash flow. Meaning, it can generate revenues and profits depending on the purpose of a certain estate. First, the strategy includes making physical changes and improvements to the existing estate. Second, repurposing the property into a whole new estate can ensure great interest from the public. Third, improving the management to increase customer satisfaction.
Strategically, value-add investment makes use of existing estates converting them to their full potential value for market purposes. Risky situations might occur during the process but one thing is for sure, it will offer better returns and even provide better profits. To generate a good cash inflow, investors must secure capital for the estates’ renovations and material costs.
Like investing in stocks and bonds, value add strategies are subject to various price changes. It may suffer losses or gain profit depending on the location and purpose of a certain estate. The so-called ‘restructuring’ is a strategy under value-add that can be risky after implementation. The investment might be wrong or right one depending on how the public reacts to it.
Is value-add the right strategy to use? It is important to note that all investments are risky on different levels. Of course, its effect on the public will be the determining factor whether it’s the right decision or not. Remember, value-add investments are riskier than other strategies. However, a successful value-add can give better profits and revenues.
Second – Opportunistic Approach
Opportunistic approach strategy on real estate is a very tricky move. One must move or create a plan beyond the spectrum making full advantage of the future to gain profit and revenue. It is important to know that the opportunistic approach needs to go beyond the expected plan which needs rehabilitation or changes to trigger interest from investors and consumers.
Oftentimes, the profit and revenue will remain blank until the plan is successful. One good example is investing in the raw lot and making it into an estate. One must know that benefits happen if the plan or the approach is successful. However, this plan will fail if not executed properly without help from all the team members and planning department.
To be one of the top-tier estate companies, a group of qualified people will create a plan that can divert the attention of the public back to real estate and investment. The opportunistic approach will be successful if all team players do their part.
Third – Core Investment Strategy
A core investment strategy is the least risky approach among the three. Core investment happens when investors or estate holders want to create changes on existing properties. These properties are usually in a desirable location providing constant profits and revenues. Oftentimes, these estates require less or no physical adjustments but need management improvements.
Investors have great interest in these kinds of estates for it has fewer drawbacks and less budget for any physical improvements. Yes, this kind of investment provides a stable profit and more opportunities in the marketplace. In this regard, core investments have the most constant cash-ins and flow with fewer drawbacks.
Commercial and industrial estates are all subject to having that core that can stand a declining economy. For this reason, drawbacks and financial issues are inevitable. Luckily, most estates are in desirable locations making it less risky and has a good market value. Cash-ins and flows are not an issue thus all core investments never fail to reach the desired profit and revenue in a month.
Turning Crisis into Opportunity
A good example of turning crisis into opportunities can be learned by the approach of value add investors such as Yakir Gabay and the company AroundTown (10% owned by Avisco which is controlled by Yakir Gabay). Aroundtown SA is one of the most known and successful real estate companies in Europe. From the management of the estates, all plans and market strategies remained successful without fewer drawbacks. The company seized this moment to do their plan and grab the consumer’s attention by following the game-changing strategies above. It is no longer a question why Aroundtown SA remains a top-tier real estate company.
The pandemic created lots of opportunities for real estate industries regarding management improvements and planning. For this reason, it is important to have a great team that can create or make a crisis into an opportunity to earn and make profits.
Creating opportunities during an economic crisis will be the most successful story in the estate industry. Of course, it is ideal to follow a certain plan to give a better service to the people and the market. Investment might be risky at the start but will be better after a few years in the industry.