The worldwide real estate market has changed massively over the last few years with many investors starting to see the market as perhaps more important than stock markets in the short term. This has led to a quandary for many investors, do they have the time, experience and skills to take a hands-on approach or should they look at a hands-off approach bringing in experienced developers/management companies?
Do you have the time, skill and experience?
There is obviously a hedge for those looking at the hands-off investment approach because there are costs associated with appointing developers/management companies. In theory this will reduce the basic return you can expect on your investment although in reality very often the experience of these third parties can actually add to the investment. So, appointing someone to look after the day-to-day management of your property assets could be the most sensible approach for many people.
Access to the marketplace
While you will need to do your due diligence when appointing a developer/management company to look after your property assets, you do potentially gain access to their industry contacts. This can create an array of opportunities for you to pick and choose different property assets you would not normally have access to, as well as the option to acquire parts of a development.
The hands-off approach will bring together an array of investors who can gain exposure to particular assets such as hotel rooms, student accommodation and care homes for a fairly modest investment. These opportunities often come with assured rental returns for a specific period as well as buyback options to ensure that you have an exit route.
Due diligence is vital
The Internet has changed many areas of both private and business lives offering access to information and feedback which would not necessarily have been available in years gone by. It is therefore fairly easy to carry out your own due diligence on potential developers/management companies you may work with in the future. A simple search of press comment, prominent property forums and other websites will often see red flags appear where dubious companies are involved. The simple fact is that it is becoming more difficult for companies to bury bad news and bad reviews.
It is also advisable to bring in professional third parties to carry out some form of due diligence and also to ensure that your legal agreements are watertight with no surprises in the small print. The fact is that once you have signed a document you are agreeing to the terms and conditions and, even if these turned out not to be what you expected, in the eyes of the law you have already agreed.
While hands-on property investment will always be at the forefront of the marketplace there has been a significant increase in the number of hands-off opportunities. This type of investment can be perfect for those with limited experience or time to monitor their investments, often allowing investors to acquire smaller units of a larger development. It really is a case of “horses for courses” and in reality there is no reason why you can’t incorporate both hands-on and hands-off management in different areas of your investment portfolio.