Market conditions
“All business is local”. Based on this finding we consider a comprehensive market analysis as a key driver of success. Therefore, small-scale market analyses and forecasts are essential at the beginning of each investment planning process that shall be successful in the long run. Opportunities and threats can be found in all sub-markets, whether they belong to economically strong (e.g. cities) or structurally weak regions (e.g. South-Brandenburg). We believe that investment decisions should rather be based on the described opportunity-risk profile and less on following the mainstream, which mainly focuses on core properties.
The task therefore is to identify and systematically tap economic potentials. This only works with a reliable assessment of the market and the knowledge of how market forces can be used to improve performance.
Investment Strategy
In our view, a convincing strategic approach is to focus on those rebuilding measures with the highest effect on the net rent. This condition is especially true for construction works which are meant to save energy. In this context the investor will profit for two reasons:
- The demand for comprehensively refurbished apartments is strong and the willingness to accept a higher rent is generally given
- Rehabilitation measures in energy efficiency are future-proof and connected with a high stability of the asset value; buildings that show this technical level, are attractive for buyers who are looking for safe investment opportunities
A consistently implemented market-oriented investment strategy will be the basis for a successful investment.
Impact on Yield
The keys to successful investing are:
- Investment volumes: Cap-ex for the necessary portfolio development is specified for each building.
- Investment effects: Effects of modernization measures on the net yield are determined for each building.
- Increased dwelling value: Tenants will benefit considerably.
- Tapping rent potentials: Necessary rent increases are in line with the legal requirements.
- Increase net rent: Result of a sustained reduction in vacancies.
- Improved net income: Limitation of ongoing maintenance.
Through the sale, an ROE of 10% - 20% can be achieved by focusing on energy efficiency measures, calculated with an equity share of 10%. This is based on the significantly improved net value, with the effects of a dynamic market demand not yet included.
Success is not the result of favorable circumstances and a dash of luck. It rather bases on comprehensive knowledge of housing industry structures and the use of appropriate instruments that economically optimize the overall portfolio.