While many investors complain about a lack of deals and high pricing, others see nothing but opportunity. One difference in perception is risk tolerance. Another is a reluctance to embrace new development models. But I think the biggest factor in the vision discrepancy is the nature of their organizations.
Enterprises are better positioned to uncover deals because they simply see more opportunities. By enterprise, I mean an organization devoted to purchasing and developing investment real estate. While this may seem obvious, the majority of the real estate market is made up of individual investors, users, and trade buyers who operate at a relative disadvantage because they lack enterprise resources. Interestingly, it’s not necessarily size or type of structure that is the determining factor, but a disciplined approach to sourcing and operating property. Many small enterprises are extremely effective because they work within a larger network and command useful technologies. Enterprises have strategy, focus and can match their resources accordingly.
Enterprises work with a business plan based upon a market need or a strategic advantage. For instance, some enterprises have an advantage in construction expertise, tenant relationship, a capital source, or simply vision. Enterprises will make their own markets and create their own deal flow. In many cases, enterprises already know which properties will fit their model and it becomes a matter of process.
Technology has greatly changed strategic execution. Googling, internet mapping, and online title records help identify prospects. Smart phones, digital cameras, and internet communication give immediate information and access.
Enterprises are better suited to use new technology to meet their goals. For instance, one enterprise buyer has equipped me with a database that I access on my handheld computer when I am in the field. This provides focus and real time communication.
Enterprises also differ from “end-user” buyers because they invest in people, relationships and systems. A typical enterprise includes senior real estate experience, access to finance, and perhaps the most significant – the ability to stick with a plan. It is still a relationship business and the enterprise is able to get its message out to more people.
Should individual buyers devote the same resources as the enterprise buyer? It truly depends on their perspective. But without building an enterprise model, it will impossible for individuals to compete for “deals” on a regular basis. Luckily, for all smart investors, there are always opportunities to have a balanced portfolio that includes rent growth and appreciation to make the non-enterprise buyer welathy.