Four Areas Where the Best Vertically Integrated Real Estate Companies Excel
Succeeding over the long term in the real estate business inevitably takes a sound strategy and consistent execution. Some of the most prominent real estate companies of recent times have used vertical integration to give themselves an edge over competitors. As those who check out NRIA online will see, this approach requires excellence of several kinds but can produce impressive results when all the required ingredients are present.
Vertical Integration Suits Real Estate Well
Many real estate development and renovation projects depend upon the efforts of a number of participants. That will always introduce inefficiency that could be avoided and make it more likely that a single weak link will cause problems for all involved.
Another option is for a real estate business to handle all or most of the related duties itself. This requires developing a lot more in the way of expertise compared to offloading certain responsibilities to others. In return, a heightened level of control can allow an especially ambitious business to produce results that several parties working independently could not hope to match.
That this is a viable option has been made clear over the course of the last decade. Some of the most successful real estate companies of recent times have made heavy use of vertical integration. In practice, that often means accounting for issues like the follow without relying on others:
- Investment. Some developers use bank-provided loans to fund most of their projects. That typically proves expensive and restrictive enough that soliciting funds from investors tends to be preferable. Many real estate development companies that use this sort of financing, however, have partners handle the details. Vertically integrated developers who interact with investors themselves thereby gain more control over the process.
- Development. It always takes a great deal of expertise to turn a planned real estate project into a reality. Even the most vertically integrated of real estate businesses cannot hope to succeed if it comes up short with regard to the nuts and bolts of development. That means maintaining a high level of expertise concerning matters ranging from market and property selection to project management.
- Redevelopment. Building a new development from the ground up is a common option, but it is sometimes not the best choice. Successfully redeveloping an existing property can produce even larger returns, in certain cases. Once again, it takes a wide range of specialized skills to be handle this type of work with confidence.
- Management. A poorly managed property can end up falling far short of its potential, and investors will always take note of such failures. Vertical integration that includes highly developed property management skills allows real estate companies to produce larger returns than competitors. That will inevitably mean being able to impress investors enough that securing funding for future projects becomes easier.
Vertical Integration Often Translates Into Success
Businesses that display excellence in all of these areas have been responsible for some of the most notable real estate success stories of recent times. While vertical integration is not the only option, real estate companies that leverage it effectively often end up being significantly more capable and agile than their competitors.