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The Pros and Cons of Property Specialization

The Pros and Cons of Property Specialization

There’s definitely much to be said for setting oneself apart from the pack in business. In fact, particularly when it comes to business, establishing a reputation that sets you apart from the pack in a certain niche or area of expertise can be invaluable. This allows you to be the go-to source when a client is seeking out specific information, thus distinguishing your company from the competition. Of course, there’s also a risk involved in all of this: When dabbling in specialties, you need to make sure there is ample clientele out there for that specialty to keep your business profitable. These considerations should come into play for property managers that are considering investing in unique or specialized properties, such as waterfront or luxury properties.

Following is a brief listing of essential pros and cons you should consider when determining whether or not adding more specialized properties to your portfolio is the right business decision for your company.

Pros

  • Brand building. Specialized properties can assist in building your brand. For example, realtors in your area with clients looking to rent a luxury apartment will learn to go directly to you, setting your business apart from competitors.
  • Market stability. It goes without saying that the economy and rental market are out of your control. However, certain sectors of the market are more stable than others—if you can identify one of those sectors and cater to it, this will go a long way toward insuring your business thrives even in difficult times. Look for niches to cater to in your own area. For example, if there is a high-profile hospital in your town that has historically weathered economic downturns well, investing in a nearby luxury building for this highly-paid sector may be a savvy investment.

Cons

  • The Pigeon-Hole Effect. This pertains to those property managers who are only dabbling in specialized properties. If you manage a couple of high-profile luxury properties, but also have some more bread and butter mid-range properties under your care, local clients could come to associate you only with the more upscale housing – making it more difficult to appeal to those looking for more standard property choices.

  • Market instability. While identifying a stable market and catering to it can work for you, it can also work against you. Let’s say, for example, you have invested in water-front properties, but live in an area that is prone to hurricanes or other unpredictable weather-related events. Potential damage aside, in the wake of such an event you may find that potential tenants are less willing to occupy such properties, thus harming your business potential.

When determining whether specialized properties are for you, take a long, careful look at what your reputation already is, how you want it to evolve, and how much effort that evolution will take. Before making an investment, also make sure you have carefully researched long-term trends and are both confident about sector stability and well aware of any potential hurdles you may encounter along the line.

 

 
This comment was minimized by the moderator on the site

I think one of the pros you are missing is improved pricing. The more specialized a property is, the less they are susceptible to commodity rent pricing.

  Brent Williams
This comment was minimized by the moderator on the site

Completely correct, thanks for sharing.

  Buildium LLC

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