This post comes to us from Inner Circle leader Andy McNulty, who before starting TouchStay (digital welcome book) was the CFO for Gucci America Inc.
During the recent growth years you may have taken on properties that aren’t as financially efficient as you’d like. You’ve probably valued “inventory” growth rather than efficient growth, which is to say you’ve taken on properties that don’t make as much money as you’d like.
You aren’t alone. Based on frequent conversations with managers over the last few weeks this is quite a common situation. One manager in Oxford, UK, told me they will no longer be taking on 1-bedroom apartments because they don’t rent for as stable a price year-round.
This isn’t only about the type of property but also the location.
Clearly the right location attracts a premium, but what about marginal locations? Two rows back from the beach? Sure, they are a lower rental, but do they rent at higher occupancy with more stable pricing?
Sounds obvious. Yet in the fast-paced growth years this idea of optimising your portfolio has seemed a secondary priority to growth itself.
Action: Reassess Profitability Per Property
Now is the moment to reassess profitability on each of your properties and set a clear strategy for when growth returns. Review your portfolio and understand how much margin you’re making on each of your properties. Then build your future growth strategy around that knowledge. Commit to taking on only those properties that will return efficient profitability.