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The real estate business that promises high incomes and seeks to become the evolution of temporary rentals - La Nacion Propiedades
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El negocio inmobiliario que promete altas rentas y busca convertirse en la evolución del alquiler temporario
Todo lo que hay que saber sobre una inversión que avanza en el mundo
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January 19, 2024
Everything you need to know about an investment that moves the world forward
By Marcos Villanueva
The managed rental business model gains prominence in the real estate market
The global real estate market is constantly changing, we are witnessing several fundamental transformations. However, among these, one stands out as the most significant: the shift towards access to service over mere ownership . This transition, increasingly prominent globally, is radically redefining our perception of and the way we access real estate .
In a world where job and geographic mobility is increasingly common, people crave the flexibility to change locations or homes with ease. Furthermore, the financial barrier to purchasing a property is high in markets where mortgage credit is limited or non-existent. Owning a property implies a considerable financial burden, including maintenance expenses, taxes, insurance, expenses, repairs, equipment and furniture, among others.
In this context, the managed rental business model , offering serviced apartments, also known as 'serviced apartments', is emerging as the next evolution after the classic hotels and popular temporary rentals on platforms such as Airbnb.
The details about the managed rental business model
1) What does the managed rental business consist of?
Serviced apartments represent a residential option designed to offer guests a very home-like experience while enjoying hotel -like amenities. These spaces are carefully designed to ensure the maximum well-being of those who occupy them, offering a wide range of services that transcend the conventional. These services include reception, cleaning, access to gyms, swimming pools, laundries, coworking areas and even movie theaters in buildings that have these amenities.
These versatile accommodations are usually presented as studios or compact homes , in buildings that are completely intended for this use and whose units are adapted to meet the needs of short , medium and long-term stays. In a context where consumers look for experiences that provide value and facilitate community interactions, the demand for these services has been increasing . Mainly in the United States and Europe, serviced apartments have become the preferred accommodation choice for young people, tourists and digital nomads.
What is distinctive about these proposals is their alignment with the concept of flexible spaces , as they offer guests all the comforts to satisfy their needs during their stay, even if they wish to extend it. This contrasts markedly with traditional hotel offerings , where stays tend to be shorter, averaging one to three days, and lack the additional amenities that serviced apartments do offer, such as equipped kitchens and other necessary functional spaces.
Demand for these services has been increasing in Europe and the US.
2) How the model operates
The managed rental business model for operating serviced apartments typically follows two main structures: a building with a single owner or institutional investor, or an organization through a management trust in which multiple owners contribute their units to the Income pool : the owner no longer earns from his unit on time, but by contributing his unit to a group of apartments, he receives an income proportional to the total income of all the apartments minus the total expenses. In both cases, a specialized operator is hired in charge of managing the business.
Incorporating this operator in the early stages of conceptualization, design and planning of the project is essential to optimize processes, generate efficiencies and provide key support in making strategic decisions for the future development of the business.
The operator must have experience in the management of large buildings ( property management ) and assume various responsibilities. These include rental management, the provision of services to guests, the administration of amenities and common areas, as well as the maintenance of the apartments and the building in general. It is essential that you have knowledge in design and management of the experience for users, in amenities and in the services that the property will offer to users. In addition, they must be in charge of customer service, managing the relationship with investors, ensuring regulatory compliance, generating reports and facilitating the payment of business profits to investors.
In summary, the specialized operator assumes an integral role in the management and administration of these business models, ensuring an optimal experience for both the guests who are the users, and the investors involved in the project.
3) What are the advantages for real estate developers
The adoption of this model by real estate developers presents a number of significant advantages. It provides access to owners interested in investing in rental projects, who seek higher financial returns, while delegating operational management to a specialized operator. This approach frees them from operational tasks, allowing them to concentrate on the execution and development of the project, which translates into considerable savings in time and effort.
The inclusion of managed rental proposals in mixed-use projects , which combine different spaces such as offices, commercial premises and traditional residences, represents a growing trend. This strategy expands the value proposition of real estate projects , offering a diversified range of residential options that fit the changing needs of buyers and owners. By integrating serviced apartments into larger projects , the offer is enriched and a more dynamic and attractive environment is created for potential investors and buyers.
4) Is the reconversion of the microcenter an opportunity for this business?
In the same way that is happening in New York City , where a plan is being developed to convert vacant office buildings (built before 1990 between 5th and 8th avenues and 23rd and 40th streets) into residential apartments, the The microcenter of the City of Buenos Aires also presents multiple advantages to carry out this transformation, leveraged by the ease of access, the large number of square meters of office buildings (the vast majority of which are already obsolete for that destination and/or have high levels vacancy), the proximity to service areas and institutions and the potential for growth capacity.
This type of transformations aimed at making better use of all those square meters , in addition to making it more sustainable , will increase the supply of rental housing , and revitalize a sector of the city that, since the pandemic, seems to have lost vitality.
The implementation of managed rental businesses under the model of apartments with services for this type of buildings converted to residential is proving to be very attractive for real estate developers and investors in the main capitals of the world.
5) What to take into account when implementing it
For the successful execution of a real estate project that includes the managed rental business, there are a series of systematic steps and key aspects that are being adopted by professional and successful investors, who have conceived this model with positive results:
Temporary rentals
- Incorporate the specialized operator early : integrating the operator from the initial phases of the project allows their collaboration with the design and architecture team, optimizing the configuration of the building for the provision of services.
- Identification of the client profile and design of experiences : in an increasingly niche real estate market, it is essential to understand the target client and create an experience program aligned with their expectations to guarantee an attractive offer.
- Optimization of amenities for the user experience : analyzing, appropriately sizing and improving amenities from the beginning of the project is key to ensuring an optimal user experience.
- Operation business plan : creating a complete map of services and establishing the necessary organizational structure guarantees efficient delivery, as well as its implementation plan. Initial and operating expenses should also be projected for at least the first year in order to provide a clear view to the investor about the investment and expected returns.
- Definition of technology to implement : Carrying out an exhaustive analysis of the functionalities that you want to cover with technology for the user and developing a technological roadmap for the operation of the asset are essential for future operation.
A user-focused team, prioritizing their needs and desires, guarantees an effective response. Surrounding yourself with experts in time streamlines the experience, allowing design optimization, efficient business operation, and a more attractive proposal for the market.
*The author is Co-Founder & CEO of Waves In Movement, a real estate company specialized in consulting, investment and management of real estate assets with main offices in Buenos Aires and Madrid, and actively involved in different projects in Latin America.
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