How Much Does Branding Matter When Investing In Real Estate?
How much can branding possible matter when it comes to buying, selling and investing in real estate?
Some may believe that branding is completely irrelevant when it comes real estate. For others, branding is everything. So does branding make any difference in the value of properties, and the profitability of dealing in real estate for any of the parties involved? If so, how much?
The Math Always Comes First
Whether purchasing a home or investing in property, always look to the math. Do the numbers on the property work? How do they really compare to other comparable properties? What could be the downside of doing business with a particular brand? Or the upside of going generic? There could be extra financial benefits of both scenarios, given two identical units. Which offers the most equity, cash flow yield, and return?
Just do the math. Recognize the potential upside and downside of the options.
Are You Trusted?
A big part of the branding question is about being trusted. Are you trusted? For real estate investors flipping houses and renting them out, being trusted can make a significant difference in performance. There is a huge difference between those that have worked hard to become trusted, and the rest. Consumers are so burnt out today, they are often automatically distrustful of all types of vendors. Recent bank debacles haven’t done much for the industry’s reputation either. Building trust takes work. Those that do exude trustworthiness, and have built strong relationships, can easily find they are able to sell houses faster, rent them faster, and fairly command a reasonable premium for them.
The Higher the Price, The Higher the Importance of Branding
There can be an even more distinct difference in branding impact at the higher end of the real estate market. At the top end of the luxury market, more factors can come into play. Instead of focusing on affordability, many buyers, renters and other investors are honing in on quality and prestige. Who remodeled the property? Which brand name appliances, flooring and wall coverings have been installed?
Today; who designed buildings is becoming even more important. Condo hotels and building or community operators also often come into play. There can be a very distinct difference in their performance. Familiarity with a brand name isn’t always better. Consider the new Marriott farce. Few probably believe that the hotel chain is so broke they need to scam event hosts and guests for Wi-Fi. So the fact they are being fined $600,000 for doing it speaks volumes. It’s so easy to lose a brand reputation today.
Brand Name Real Estate is Adding Real Value
Passive income property investment programs from reputable vendors are a great example of how a brand can add real value to real estate. Specific neighborhoods around the country have their own brand. Think about the premium put on Manhattan real estate, The Hamptons, or Golden Beach in FL.
Branded buildings, or buildings promoted by high profile brands, can also increase the actual purchase prices and rents. In New York, London, Menlo Park, and Miami there are plenty of examples of premium branded buildings achieving higher prices per square foot. The Edge in New York recently pulled off a $200 premium over comparable properties. In Miami developer consultant Kaya Wittenburg says going beyond The Porsche Design and Armani Towers, a new oceanfront development is planning to push up per square foot prices by over 30%.
The benefits and value for buyers and investors in the short term is obvious. However, Wittenburg points out that brand can be equally, if not more, important in times of uncertainty. Like a rare bottle of scotch, limited edition Luis Vuitton bag, or Lamborghini, branded real estate can hold its value much better in tough times. For wealthy investors, this can provide great prospects for preserving capital.
Stronghold markets like San Diego, CA have proven that while they are not completely impervious to fluctuations, they normally bounce back first, highest, and the better equity positions from having attracted more cash purchasers keeps them far healthier. This is even truer today, given the huge percentage of cash transactions over the last few years. Of course, this does not suggest it is ever smart to overpay for property. This especially applies when investing in real estate for a profit.
Reputation Management for Real Estate Investors
Real estate investors thrive and survive by their reputations. A good reputation can mean adding immense brand value. Look at the $3.5B acquisition of Trulia by Zillow, even though the organization wasn’t turning in a net profit.
However, like the Marriott case, and many U.S. banks, a reputation, and brand value is easily lost. Real estate agents and investors must watch their reputations. The best will do it proactively, not reactively. Know that buyers are becoming more demanding, and in tune to how to check you out. They’ll be watching you for signals on social media, Googling you for any hint of your personality, and in some extreme cases have been contacting previous owners, and renters, to find out about property.Even which vendors and real estate services companies you associate with and refer can make a significant difference in how others perceive your brand.
So build your reputation, recognize the benefits of branding at all levels of real estate, but above all, watch the math.