Adapt or die
The time to diversify is right now
By Colleen May
Since 2008, the world and South Africa have experienced a recessionary climate, the result of which has been a drop in property transactions over the years. People have had to be more cautious with spending and the dramatic rise in the last few years of the cost of living, coupled with a weaker rand, has hit the real estate industry the hardest. It is in these tough times that the need to diversify and create new revenue streams has become a necessity. So how can you ensure that you don’t end up as a casualty of the economic times?
Francois Staples, joint CEO and co-founder of Galetti Knight Frank says, “Staying relevant means adding value, whether this is recent and regular market updates and industry news or an intimate knowledge of the area in which you want to be located. Businesses also need to be 100% up to date with new industry regulations and legal changes and trends as well as marketing trends, both on and offline.” In order to sustain your business and thrive, not just survive, you need to think about creating new avenues and altering existing ones. Selling property is the bread and butter of an estate agent but the means by which you make the sale need to be updated. Gone are the days of relying on advertising property in the papers and showing houses to sell property.
Show houses, yay or nay?
Are show houses out of date or still a necessary part of the selling process? With the advent of technology and virtual viewings, the importance of show houses has diminished somewhat, but people still want to see what they are buying. Sometimes even after viewing the property virtually, it is the show house that seals the deal. But show houses today need to stand out; it’s not just about filling the space with some furniture and a flower or two, you are selling someone a dream, and the property needs to reflect that.
Seasoned interior designer Natasha Lockwood of NL Global Interiors has some advice for creating the perfect show house. “For a development, from my experience one needs to consider a variety of factors: Location, target market, style of development or property/house, style of internal finishes as offered by the developer, possible areas that need to be camouflaged, and areas or views to be highlighted so that a potential buyer’s attention is drawn to them.”
For example, if the development is an urban, loft type of apartment aimed at the under 35 sector, then one would decorate it to appeal to the market and highlight the architectural style. “Think contemporary fabrics and furniture: Chrome, leather, and suede in neutral colours with shots of accent colour. Generally, larger statement furnishings make a space appear bigger and, of course, good lighting and large mirrors always enhance an interior. Accessories such as throws, scatter cushions and flowers are always important,” says Lockwood. The interior, however, should not be too individual so that the style puts off a potential buyer – it’s a fine line between neutral and boring, she advises. The buyer must be able to easily imagine living there.
With a private home, one needs to take the existing home from an individual, lived-in space to a place where all potential buyers can visualise themselves in, according to Lockwood. “Anything special, such as a view or kitchen, needs to be displayed to its best advantage. If the walls are looking tired, then freshen them up with one coat of paint in the same colour. However, if the walls are painted in an individual colour that might not appeal to the general populace, rather re-paint them with a neutral colour.” An example is a south-facing apartment that had been painted a very dark blue-green. Lockwood says that this is a cold colour, and it made the south-facing apartment even darker and colder than it really was. “Eventually, after it had been on the market for some time, the seller agreed to re-paint the apartment and just painted it white. It sold at full asking price very soon thereafter.”
While a show house is a valuable tool when it comes to ensuring success in selling your properties, it’s not enough to just focus on one stream of revenue. In order to thrive, you need to think about other avenues of business in the property industry. Jonathan Smith of Courtwell Consulting outlined the following as new ways to diversify within the property market: Auctioneering, property development, value-added services, student accommodation, property management and low-cost housing development. So how exactly can you make these avenues work for you?
Despite the knock the auction industry took following the scandal of the Auction Alliance kickbacks, auctions are still a viable and smart way of selling properties in a short amount of time. There is less fuss and fanfare, with the property being sold to the highest bidder. So how can you take advantage of this? If you wish to enter the auctioneering service, it is vital that you formulate your marketing approach to stimulate and inform the bidders. They know what they are bidding on but you want to create a buzz and get people bidding, and the way to do that is through innovative marketing, making the property stand out from the rest.
New development letting
Existing homes and sectional title complexes generate income but is it enough? Not everyone is looking for a lived-in home, some people want newly built homes. An innovative alternative to sell homes is to work with residential developers and assist them in the pre-letting of planned new developments. How, you may ask? In order to obtain a new development mandate you need to impress the developers with a cutting edge selling and letting strategy. You need a comprehensive marketing strategy across the media mix, websites, social media marketing, radio advertising, print media advertising and the right show house strategy.
By adding value to the property transaction, you can become a one-stop service source for sellers and purchasers; someone whom landlords, homebuyers and tenants can rely on. The added benefit of creating a good name for you and your company is the word-of-mouth effect; you cannot pay enough for the free advertising word-of-mouth will provide. People who are impressed with your services and the value you add to them will be quick to recommend your services to people they know, who, after using your services, will do the same. And the best part is, you can charge for these services. By offering a broader selection of services you are able to diversify while still remaining in the property field.
These services should include:
· Credit profiling and rating of prospective purchasers and tenants.
· Bond facilitation for purchasers.
· Assessing tenants on their ability to pay rental by obtaining employer – and bank – documentation.
· Assisting purchasers and tenants to arrange furniture removal and, if necessary, temporary storage facilities.
· Obtaining a standard purchase agreement or lease agreement from an attorney and using this standard agreement to facilitate a contract.
· Assisting the seller – or landlord – to refurbish a property under sale – or letting – in order to make it attractive.
· Collecting the rent from tenants so that the landlord does not have to incur this effort.
Another value-added service that you could venture into is property management. While it is not the easiest method of creating a new stream of income, for a savvy and organised estate agent, this could be a profitable business undertaking.
This is a booming market, with demand outstripping supply. Student housing is a profitable avenue of income for estate agents who are looking to diversify. All you need is a number of blocks of flats and houses-to-let that meet the needs and demands of the student population. Jonathan of Courtwell Consulting explains, “Student beds command a rental of approximately R1 800 per month for 10 months of the academic year. a well-administered student residence can create a viable and sustainable business opportunity for an investor.”
A neglected aspect of property transactions, low-cost housing is also one of the fastest rising needs facing the South African property industry. The development and sale of low-cost housing within well-planned estates is a new stream of revenue that should be considered. There is an urgent need for more than 2 million low-cost homes and that number is growing daily. That being said, this is a slightly more risky avenue to pursue as it is difficult to co-ordinate. To date the building process has been rife with scandals of corruption and sub-par homes being built. Should you decide to pursue this avenue, ensure that your partner is a reputable one.
Technology is not so much a method of diversifying, as it is a method of staying relevant in today’s property market. JP Farinha, CEO of Property 24, says, “Technology permeates all aspects of the current savvy consumer’s life, including the way that they search for property. With the technology available, and the vast quantity of information accessible at the consumer’s fingertips, the online environment is most often the first port of call for house hunters and property investors. This makes for a well-researched and tech-savvy property buyer, armed with all the details to make contact with an estate agent and take their property search to the next step. Technology has brought consumers to where we are today, and we are certain that it will continue to play an enormous role in developing the property buyers of tomorrow. Estate agents who keep their finger on the pulse, and stay close to property portal technology leaders and innovators, will certainly gain an advantage in tomorrow’s world.” In order to thrive in the property market today and tomorrow you need to ensure you are technologically relevant to your customers.
The age-old adage – adapt or die – is quite relevant in the changing landscape of South Africa, but that changing landscape also offers opportunities to create a business that will be relevant and thriving 20 years from now. Take advantage of the opportunities now and avoid ending up as another casualty of the economic climate.