Do you know the value of your brand? What determines the value of your brand?
Over the last number of years, there has been a significant change of which brands are leading the pack. Previously, the top brands were McDonald’s, IBM, and Coca-Cola. Now, the top five brands in the world are all technology-based companies. Google holds the number one spot with a brand value of $245.6 billion, followed closely in second place by Apple at $234.7billion, and then Microsoft, Amazon, and Facebook all in the mid $150 billion range.
Is brand important as a real estate investor? The large multi-family corporations, developers, and property managers think so. They work very hard at creating a strong company brand and spend time, money, and resources creating a recognizable brand—a brand that has value. The brand gives them credibility and value in the marketplace, but it also gives them monetary value when pitching their real estate product.
You may say to yourself, “I only have one or two investment properties, so why is brand important to me?” If you take the model of what determines the brand value of the likes of Google or Amazon, you will understand that it is more than just being recognizable or a household name.
Google’s $245.6 billion brand awareness or valuation is from an assessment of three separate value metrics:
1.) Calculating Financial Value
Brand as a percentage of corporate earnings and assessment of future earnings.
2.) Calculating Brand Contribution
Calculating the value of the brand itself on three factors:
A) Meaningful or a combination of emotional and rational affinity
B) Different or a consumer perception of being unique
C) Salient or top of mind when people are making category purchases
3.) Calculating Brand Value
Financial value multiplied by brand contribution
As an investor, whether you hold a single unit, multiple rental units, or a larger development property, your brand matters. If we use the metrics that Google is assessed on, we can see the importance of a brand.
Their current and future earnings determine Googles value. The current and future earnings also determine the calculated financial value of your investment property(s). In the case of investment properties, the value is derived from the net income and the future net income of the property(s). Better known as the cap rate, or the net income divided by the property value.
Buyers, bankers, and tenants will calculate the value of the property through the lens of emotions and affinity they feel with you as the investor and the property’s emotional vibe. They will also look to see if you, your business model, or your property(s) is unique. If they see a lack of uniqueness, you may have an unknown or poor brand. Are you top of mind to your banker? Do your tenants refer others to you? If so, you are creating brand awareness or a value to your personal brand.
I have worked with clients over the years that have fashioned a strong and valuable brand for their development companies. They have created a strong following of buyers that seek out their new developments and will pay more because of the quality of fit and finish, homes delivered on schedule, and A+ locations. I have also worked with a client who has developed a valuable brand by fixing and flipping homes. This client has created such a valuable brand that realtors and buyers call me and ask if they can view and place an offer on this seller’s properties before they even go to market. These clients of mine have developed amazing brands, but I think that one of the best examples of brand value is an investor that has more than 200 rental units with a steady stream of referrals for his units from realtors, tenants, and business owners throughout the community. The end result from this brand maker? No vacancies and rents well above market rents.
Brand value does matter as an investor. It is the difference between a poor offer and good offer. It is the difference between a development selling out in days versus months. It is the difference between vacancies and waiting lists for the next available unit. It is the difference between below market rents and market rents, or even above market rents. What are you doing to improve your brand value?
July stats show Fraser Valley and Vancouver volume of sales continuing to be strong despite the summer slowdown. It is typical to have sales volumes down in the months of July and August as buyers and sellers are at the lake, camping or just chilling on a patio.
The single-family market has slowed the most with many of the cities experiencing STR numbers in the mid-20% to mid-30% range. However, remember an STR number over 17% is in a sellers’ market. We are still experiencing a very strong market even if we have seen significant changes from STR numbers in the mid 40% range. White Rock and South Surrey continues to be the coolest single-family market with a 10% STR.
If we look at the Vancouver single-family numbers, it is a completely different story. The inventory of single-family in Vancouver has been rising month to month and even year to year. In some cases, inventory levels are approaching or are at inventory volume numbers of a few years ago. These numbers are similar to the market place before it exploded with record sales numbers. Higher inventory and reduced sales volume are making for a buyers’ market on paper with STR numbers under 10% in many locations.
Strata properties, townhomes and condominiums, continue to be very strong in the market place throughout the region. Condominiums continue to surge forward with extremely low inventory and high volume of sales. Most areas are experiencing a very strong sellers’ market with a 40% STR range. Townhomes are also experiencing a similar surge with STR numbers in the 40% range.
Other winners according to the STR numbers in the Fraser Valley are Cloverdale single-family at 32%, Maple Ridge townhomes at 52%, and Langley condominium at 53%.