Real estate investment is a business that leans heavily on search. The productivity of your search and execution ties directly to your ability to find great deals. The good news is that the subject of most of your searches already exist in built hotels. A property target list aids you by limiting the search criteria and front loading the diligence.
Focus is a highly sought commodity for smart, creative investors. Curiosity and varied interests make focus a challenging because of the constant competition for your time and attention. A property target list puts up the blinders that focus energy on areas that you’ve predetermined to be important.
A clear definition of the type of asset, location, and size that you’re targeting is the cornerstone of your investment strategy. The property target list takes this to another level by actively selecting the individual properties that fit the investment criteria.
This level of focus is rare in an opportunistic commercial real estate organization. Many acquisitions teams concentrate on building relationships with owners within their competitive set and intermediaries. However, they miss the opportunity to build relationships with a defined purpose of acquiring specific properties.
Balance is essential. Your high-level investment criteria will keep you open to accepting good random opportunities. Whereas, a targeted approach creates the concentrated effort that delivers consistent results. Nations fight and win wars when regular infantry and special forces work together effectively.
Consider all the analysis that goes into underwriting a typical hotel. You build a financial model, learn about the market, and make a variety of assumptions about the future. Ramping up this process is time consuming and may require you to acquire data from multiple sources. This search is expensive.
Do you build your financial model from scratch every time you underwrite a deal? Do you re-learn about the demand drivers in your target markets? How much do your expectations for the macroeconomic future change every day?
In all likelihood, you standardized and streamlined most processes and systems in your underwriting and deal sourcing work flow. A property target list is an extension of this standardization.
The United States has more than 65,000 operating hotels ranging from economy scale highway motels to luxury resorts. Each property has its own attributes and challenges, and it would be impossible to learn enough about each one to make a reasonable investment decision. However, you can easily narrow that list to 250-500 properties that fit your investment criteria.
You’ll discover common elements and rules of thumb in the process that will increase your efficiency at evaluating deals opportunistically. This will enhance your ability to move deals through your acquisition pipeline and find the hidden opportunities in each deal.
Real estate investing is a competitive business. Price is one aspect of an offer that wins the deal, but credibility is usually more powerful when weighing different offers.
You establish your strength as a buyer with the first interaction with a seller or her representative. Each subsequent interaction fills or depletes that reservoir of goodwill based on positive or negative experiences, respectively.
Your knowledge of the intimate details of every hotel on your property target list sets you apart from other buyers. A file that includes all previous transactions and owners, property assessment data, and physical attributes gives you the power to have strong conversations. Sellers have a natural asymmetric information advantage, and your objective is to narrow that gap.
Action is essential to making this information effective. Regular phone calls to the owner and visits to the property will establish you as an expert. These activities will also give you a better perspective on the opportunities that are not readily available to other buyers.