The Power of Vertical Integration
There are only a small number of activities that any business can do.
- Marketing
- Sales
- Operations
We have always had a very strong focus on operations as we believe that is where the real value comes from. Someone can buy a mediocre deal and operate it incredibly well and be very profitable. Conversely, someone can buy an outstanding deal and operate it poorly and lose everything in very short order. This is why we have always had a vertically integrated property management company because we believe there is no better operator of our own deals than ourselves.
Read all about vertical integration on our newly launched website. 🚀
We have always been a very growth oriented company. We believe that scale actually makes things easier as it gives us market dominance, expertise from having more data to see the patterns, efficiencies, and allows for deep vertical integration. One has to have scale in order to have deep vertical integration.
In a time of slowed growth, we shift our focus to the two other core functions of a business, which are optimization and maximization.
Optimization is the process of identifying and implementing new methods that make the business more efficient and cost effective. For a deeply vertically integrated property management team, that means streamlining processes and implementing new methods that will enhance operations. An example of optimization at Black Swan would be bringing cleaning, lawncare, and snow removal in-house. For each of these services, we’ve improved our performance and significantly reduced costs.
Maximization is the process of making something as great as possible, of making the best use of something. For a deeply vertically integrated property management team, that means using the resources we already have (like an incredible facilities team) to maximize revenue.
So, how is Black Swan optimizing and maximizing our business during this time?
Short Term Rentals.
This slower leasing season that is usually focused on growth is now freed up to focus on optimization and maximization of getting the most amount of profit out of our existing assets–and driving returns for Fund I and Fund II investors!
We are launching short term rentals at a time when nightly revenue and occupancy is going up in Rochester, becuase of recovery from the pandemic and expansion at Mayo. While we historically have de-commissioned short term rental units already existing in buildings when we acquire them, we are practicing counter-cyclical behavior by entering the market as many have left. (You listening, Warren Buffet?)
We’ve been blown away by the results of this STR experiment so far. The second STR we ever set up is 100% occupied well into the future, and even at a discounted rate during our launch period, we are still above the break-even point versus long-term rental.
We will continue to monitor performance and scale this line of business. We can’t wait to share the updates with you.
What is something you can optimize in your life?
What resources do you have at your disposal that can help you maximize something?
Are you trying to optimize something that should be deleted?
We’d love for you to share your thoughts and experiences with like-minded individuals in our facebook group, Real Estate at Scale!
Yours in optimization & maximization,
Elaine & Nick
Black Swan Real Estate
From the Oct 24, 2023 newsletter