Monday, August 24, 2015

4 Pillars of Real Estate Business

Q.
So you think Real Estate is a great career. What is so GREAT about it?

A.
There are two ways of looking at this. It very much depends on your outlook and your philosophy in life.

1. GREATness of any choice (other than GOD) is a comparison, it is relative. Thus, it really depends on what is average or normal in your own perspective. From here, you derive what is 'GREAT' to you.

2. There are elements of positive thinking and optimism in 'GREATness'. Hence, it depends on your state of mind, your philosophy in life about what you really want, really!

For example, to a monk, greatness is attending 'self actualization' or become 'Nothing' or '空'.

To a scholar, greatness may be his discovery, or winning a Nobel Prize.

It is like a computer, there is a hardware and a software when I choose to look at GREATness in Real Estate business. In the analogy of computer, greatness in real estate business has two aspects of hardware and software.
  • Hardware - Wealth and Material preservation - sustainability and durability.
  • Software - Security and Stability - peace of mind and minimal maintenance.
Hence, estate agency business has two parts of this and I divide them into 4 areas in the grid below.


The 4 pillars are the basic foundations where real estate business can build upon. It is like the 4 pillars of a house where the walls and roof are supported. Without any of the 4 pillars, real estate business would be vulnerable to threats and may not sustain for long.

It is further explained below:

1. Law
The first and most extensive is law. Why? It is because if there is no rule of law, there is no ownership and no protection of property like Title and Deeds of Agreement. It is based on law that contracts are drawn and dispute if any, is also settled in a civilised manner through the operation of law.

However, the law is a dynamic thing. It is hard to appreciate that out front, but law as ever renewed either by amendments and introduction of new rules making real estate a risky deal if you are not well versed. The large part of the change is in Tax Law and regulations affecting cost of investment, like monetary laws and banking laws affecting borrowing and loans.

2. Marketing
Earlier on I have maintained my view that if there is one single element to be successful in real estate business, it is marketing. How important is marketing in real estate business? See my marketing plan here.

Marketing offers an extensive influence on people. With the advent of Internet, it can reach to masses and constantly undergo changes and upkeep at a very low cost. In fact, some of the platforms can be almost zero cost like FB or blogging - like I'm doing here. In fact, nowadays, real estate business has really evolved to an ICT level. Much has been written on this. See how internet and ICT in the business of selling real estate at the links below:

Agent vs ICT
Estate Agent vs E-commerce

And, this is within reach of every man on the street and within reasonable cost and means.

3. Growth
In fact, it should be 'Investment Growth', both in human and material resources. Nevertheless, I believe the key word is 'Growth' because real estate being a 'GREAT' career must grow, scaling greater heights!

So, the growth is both of the property value (organic - material resources) and the value of the network you built over years of selling (perception - of people).

Growth of property value is natural in the cycle of economy. It is organic means it can be seen and measured.

Land value will grow due to scarcity. Property value will grow with higher cost of material and labour. Good location will appreciate in value with amenities and support services. All these growth will fuel higher value and thus bigger pay out as commissions in sale or rental.

Growth of network is a perception. The key ingredient for success in any selling activity is people. Real estate business is no difference. Over time, more networks will be established. This part is the influence of trust and perception towards a brand or system of referrals. With this, it adds value to the business. And, in accounting it is goodwill or in layman term - reputation.

And, it being on the positive side due to inflation and scarcity, real estate is thus less risky compared to say, stock market or commodity or other financial instrument for investments.

See my other article on 'Why Real Estate as a Career?' here.

4. Spin-Off
Lastly, real estate business is GREAT career because it has lots of spin-offs. One of the likely spin-off is renovation of the property. This is in itself a big business. The other is consultancy. With regards to consultancy, I leave it to another article in the future.

It is very easy to understand. People buys comfort, not just houses. So, much jobs to improve living is in renovation. It consists of build which is a hardware seen outside and the soft part on the design which yields the ultimate comfort. Therefore, build and design come hands in hands for collective gains in real estate. In between, there is money to make, example in selling a better home, or organising renovation works as ancillary service.

These 4 pillars will propel you through the career of real estate, regardless of time and space as they have no replacement of any kind. Why?

DVD movie business is over taken by Cable Broadcast, photo studio business is taken over by ICT and what is next? Estate Agents taken over by what?

EBay? AliExpress? Mudah? Lelong?

No? Sure, it won't happen? Really? Why?

Because it is big ticket item, once in a life time purchase for most people. Notwithstanding, it is location sensitive, both in the comfort and connectivity. Over and above, there are laws governing land and buildings, for security and safety!

You need to see the real staff to have a feel about it. Furthermore, you need to get approval from the land office to own a piece of land or building. The local government and land office needs to verify if that property is not within the development zone by the State Authority for town planning!

So, you think you can safely buy a piece of property without checking with a trustworthy estate agent? Or should you visit your local office of land and mines before putting your dollars?

Be aware, it might be a con job! And, you definitely cannot order it by FedEx or Pos Laju!

Ref:
Own account.

1 comment:

mubashir hasan said...

thanks for the share this informative and interesting article with us
property dealer

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