We all know the power of a brand. Think Coca-Cola, Nike, Rolex…they all conjure up certain images in your mind and maintain an intangible grip on us, even if they are products we may not regularly consume.
Large Institutional Investors have captured the power of our minds in real estate. Companies like Blackstone and Blackrock have become large buyers of real estate across the country – including in Central Ohio – and currently have a dominant position in the mindshare of real estate investors.
So as a real estate investor, how do you stay competitive against such a dominant opponent
Evaluating revenue streams in light of competitive threats
Real Estate Investors generate returns from two primary areas.
- Rent From Tenants
- Property Appreciation
If you think about where private equity (and other institutional investors) can bite into the returns from these revenue streams, it’s more geared towards property appreciation. New buyers can drive up the purchase price in the market, but they have little affect on demand from renters.
To continue to thrive as a real estate investor, it’s important to stay apprised of how the market is being affected. Driving up purchase prices potentially increases the paper value of your properties, but has little to do with changing demand unless they drastically increase the supply of properties.
The increased activity from these larger buyers has an outsized effect on the market as a whole – but it also creates opportunities for properties that need renovation before leasing or are too small to attract the attention of larger investors. One key metric to keep an eye on is how many new developments start – if new housing starts dramatically increases, it could have a significant impact on the returns for any real estate investment.
What challenges are you facing in the rental market? We’d love to hear from you! Let us know what’s on your mind by getting in touch with us at RL Property Management Group.