Wednesday, November 9, 2011

Planning for Success: Developing a Focused Strategy


     When investing in rental properties you should decide up front the type of community and asset class that you will invest in, and clearly define your competitive edge – what you are offering tenants that sets you apart. Understanding these strategic fundamentals will help you stay on course and focused on growing your business.
So what type of community and asset class will you choose? Both will depend on your prospective tenants: where they work, their income level, what they are looking for in a home; and on your financial projections. Your guides will be your market analysis and our cardinal rule of investing: The rent you are able to charge should cover your mortgage and related costs (taxes & condo fees).  
Let’s use the market analysis we did for Northern Virginia in the spring of 2011 to determine type of community and asset class. 
According to our analysis Northern Virginia has a large pool of highly educated workers who are drawn to the area to fill well-paying jobs. Many come for short-term consulting projects and are seeking to live in safe communities with good public schools.
To meet the needs of these prospective tenants we would target upscale communities, which also have high occupancy rates and above average rental increases.
As for asset class our cardinal rule steers us away from condos, which have higher monthly fees and towards townhomes or single-family dwellings. And, it guides us to choose newer properties – built within the last ten years – which have low maintenance and require less updating and command higher rental rates.
This strategy also gives us our competitive advantage. Why should renters choose our properties? Because we are offering what they want: upscale communities, high-quality amenities, newer or updated properties, reasonable below market rents, and engaged and responsive property management.
            As you move ahead you may change your strategy and focus on a different asset class and other communities.  But be sure to have a clearly defined strategy behind your changes, to abide by the cardinal rule, and to maintain your competitive edge.        

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