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Original caption: From the beloved capital to chicken feathers, is the profit of long-term rental apartments a false proposition?
Originally, the real estate industry has been in the lead for subcategorization. Until 2020, under the test of the new business model superimposed on the corona pneumonia epidemic, this year’s long-term rental apartment companies have suddenly turned into “thunderstorms.”
Many people in the industry believe that under the so-called “rent and buy” at the high-end design level, capital has driven some companies with inaccurate business model positioning to “blindfold” and accelerate their progress. towards the big test.
In fact, in the context of the impact of this year’s epidemic, even if offline purchases can be diverted online in a short period of time, rental demand remains a long-term market, especially for areas with net population flows. That is why the industry remains optimistic about this field.
But this won’t change the status quo that long-term rental apartments are even more difficult and labor-intensive than hotel operations: lack of fundraising methods, circulation efficiency tests, and O&M capabilities.
With some long-term rental apartment model issues emerging this year, further testing is still underway. During the recent Fifth China Real Estate Asset Management Innovation Summit 2020, Liu Xin, founder of You + International Youth Community, pointed out that from a pragmatic point of view, the long-term rental apartment industry winter still it has not come to an end. “We must make two more winter preparations. Let the industry return to its original state. “
So in this process, how do long-term rental apartment operators capture the fate of the profits?
The problem of long-term rental apartments
To talk about the problems facing the initial operation of long-term rental apartments, Wang Ling, CEO of Chengjia Apartment with experience in the hotel industry, sighed repeatedly.
“This is a very tough industry. In fact, the profit is very small. It is difficult to survive relying solely on the rent difference,” he said during the aforementioned summit. This is also the reason for the emergence of various “innovative products” such as rental loans. .
But from a long-term perspective, it’s actually not that bad. Wang Ling cited a data set. In 2020, the number of hotel closures will reach 150,000, of which 98% are independent hotels. The reason is that there is no source of customers, sufficient cash reserves, and supply chain support. “The most difficult time in the hotel industry is when the rental rate is lower than single digits, but the rental rate for apartments is still relatively high and the situation can change quickly. Therefore, apartments are more resistant to risks and more resistant to long-term cycles. Long-term rental apartments may not be the most profitable investment, but it is definitely an investment that can make a steady return, “he said.
Therefore, Wang Ling pointed out that if the long-term rental apartment or hotel industry is a long-term field, it needs continuous operation and maintenance, deep cultivation and refinement to achieve greatness little by little.
“The way to crack is to refine operations. This is not a secret. The key is whether it can be done,” he concluded.
For the difficulty of operation and maintenance, Meng Yue, general manager of Ziru Asset Management Platform, has the same opinion. He pointed out that the difficulties in the development of long-term rental apartments come mainly from four aspects: investment judgment, operational capabilities, financial support and exit conditions.
In terms of the company’s own exploration, Ziruo entered the field of centralized leasing in 2012. This is undoubtedly a heavy-duty model that requires long-term operation and is also adopted by most rental apartment operators to long term on the market. mode.
“So the biggest problem comes from inaccurate investment judgments.” He said that the investment cycle of centralized long-term rental apartment projects takes ten years or more, which means that many parameters are difficult to design and understand.
Operational capabilities are easy to understand. Today, operators mostly rent centralized long-term rental apartments to owners. This means that in the long-term operating process, how to balance prices, occupancy rates and operating costs is extremely critical.
“All the difficulties we face are that the resources and operational capabilities are difficult to support the requirements of efficient operation. After discussion, we felt that operating long-term rental apartments would be more difficult and several times more difficult than operating hotels.” Meng Yue continued.
In this context, the lack of low-cost long-term funds has become inevitable. “Especially for centralized apartments, the investment can range from 10 to 20 million yuan. The long-term cycle requires at least 5 years to recover funds. In particular, there are many lightning incidents in the industry. Financial institutions will definitely have tighter judgments in the market, and it will be difficult to get more in the future. Multi-fund support. ”He analyzed further.
Obviously, the RETS or quasi-REIT models currently being tested in commercial real estate will not be able to land in the long-term rental apartment sector. The core is that the vast majority of operators do not own properties and cannot participate in this type of financing; Additionally, internal compliance of apartment assets has not been flagged, and different operational rate of return considerations affect actual apartment rentals in the long term. The model does not currently have a mature exit channel, which is the great challenge facing the industry.
High precision granular operation and maintenance
In the face of problems, the important thing is to break the game. Currently, relatively mature traders have mentioned a refined operation with keywords.
Wang Ling pointed out that while long-term apartment rental is an industry that requires relatively traditional O&M capabilities, it must also rely on digital and smart methods to optimize and drive development.
The refinement will be implemented in very detailed links. For example, in the process of cleaning and disinfection in the apartment, the amount of raw liquid that is consumed and how to dilute, the standard work content of the housekeeper, the purchase price of toiletries, etc., imply the integral management of the front, middle and back office, everything must be controlled very finely.
“This is different from property management. We need to precisely manage the homes in the house and the sales function. These capabilities cannot be established overnight,” he continued.
Meng Yue also brought up this point, and the same logic applies to the price of the room. In his opinion, this is also a more basic data indicator than the occupancy rate in the operation of long-term rental apartments.
“The pricing system in the hotel industry is much more advanced than that of apartments, and many apartments still do not have a revenue management system. In the early days, we needed to rely on internet inquiries for prices, but now we have different prices in a building depending on the different floors and types of apartments. The difference in the speed of renting and leaving the house and the sales cycle, the price will be completely different, and this must be supported by the system. ” He noted that free management will be fine-tuned to focus on single-store, single-room monthly growth data, and dynamic institutional management will be implemented. , Through the rapid establishment of the system, thus improving operational efficiency.
As mentioned above, after experiencing many changes in the long-term rental apartment industry this year, a new medium-to-short-term “normal” will also appear across industries. The entire industry still needs some time to adjust and explore before it can return to normal operation.
Meng Yue believes that the industry will continue to integrate in the future, and the efficiency of the industry will rebuild during the period. Through the survival of the fittest, the main team and the platform will stand out.
But at the same time, due to interference from industry dynamics this year, the next financing environment will be relatively difficult. Without an effective exit channel, the survival of centralized departments will be more difficult.
Although some policy-based rental homes are showing signs of a growing launch, due to their limited return on investment, the industry generally believes that their landing process may not be particularly straightforward and most rental needs will be difficult to solve. short term. problem.
“We believe that the next industry will move from competition to competition and cooperation, and cooperation and mutual benefit is the way out.” Meng Yue said that in the past, the industry will focus on comparing the growth rate of each other’s homes, but in the future more institutions will work together to build a larger platform, through the professional division of labor between different agencies, to achieve mutually beneficial cooperation.
(Author: Luo Yiqi Editor: Zhang Weixian)
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