MGT3SMG | Real estate & AirBnB Domain of Strategic Management Report

PART 1: Introduction

This report is based on the domain of strategic management. Being a consultant, I have designed this report to help my business customers in various aspects of building strategic portfolio. There are four main areas i.e. Bundoora, Kingsbury, Preston and Heidelberg West for considerations with the requirement to own 30 residential properties. Moreover, each property should comprised of 4 bedrooms and 2 bathrooms. 

Diversifying portfolios is a technique used in strategic management to incorporate a wide variety of investments into a particular one portfolio to earn greater returns. Furthermore, in order to generate a more than-average return, the client needs guidance as to whether to position all 30 assets in the possession of an agent of real estate, on AirBnB or make a portfolio that includes both types of properties. In addition, in this task, the selected period for revenue forecast is around 1 year or 52 weeks.

This task is designed in the form of report that consists of 7 parts. Section 1 introduces the report.  Section 2 offers information on market analysis and on the efficiency figure of the customer resources. Section 3 explains the portfolio of the client in depth. Parts 4 and 5 provide a demonstration of revenues and costs. Section 6 focuses on the overall net position. In the last, there is Section 7 which dealt with the overall conclusions and recommendations.

PART 2: Market research and efficiency figure of the properties

This part is based on the market research related to the 4 types of properties. The first thing is to define the efficiency figure for all 4 types of properties registered on AirBnB. Moreover, market research is the process identifying terms like median rental and median house price.

On the basis of analysis, it is suggested that not every solo AirBnB managed property is rented 100% of the time; therefore, I find that AirBnB property is rented 4 days out of 7 days a week, rendering an efficiency figure of 57.14%. This efficiency figure is intended as:

[(4/7)*100] = 57.14

Nevertheless, the efficiency figure for the Agency-managed properties is constant, that is 90%, previously indicated in the task details.

The data in this task is defined on market research conducted by two main websites such as realestate.com and airbnb.com. Whilst doing analysis from realestate.com, it is concluded that the figures are real, excluding the case of Kingsbury and Heidelberg West, where a predicted numbers were used due to the absence of data as presented in Fig 5 and 11. In the instance of AirBnB, all figures are predicted on the basis of the approximate availability of airbnb.com data.

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PART 3: Client’s Portfolio

The portfolio of my client is consist of total 30 houses in the 4 suburbs i.e. Bundoora, Kingsbury, Preston and Heidelberg West. These all are composed of 4 bedroom and 2 bathroom.

Bundoora has 152 properties accessible for rent on the realestate.com for the agency-managed properties. The Bundoora map is shown in the Fig 1.

Fig 1: Bundoora Map 

For agency-managed property of Bundoora, weekly rent is $523 on the realestate.com. 

Fig 2: Bundoora weekly Price

For AirBnB-managed property of Bundoora, weekly rent is not available as shown in Fig 3, so I estimated the value.

Fig 3: Bundoora map based on Airbnb.com

Kingsbury has 18 properties accessible for rent on the realestate.com for the agency-managed properties. The Kingsbury map is depicted in the Fig 4.

Fig 4: Kingsbury Map

For agency-managed property of Kingsbury, weekly rent is not available on the realestate.com so I predicted the value.

Fig 5: Kingsbury weekly Prices

For AirBnB-managed property of Kingsbury, weekly rent is not available as identified in Fig 6, so I estimated the value.

Fig 6: Kingsbury map based on Airbnb.com

Preston has 159 properties accessible for rent on the realestate.com for the agency-managed properties. The Preston map is shown in the Fig 7.

Fig 7: Preston Map

For agency-managed property of Preston, weekly rent is $650 on the realestate.com.

Fig 8: Preston weekly Prices

For AirBnB-managed property of Preston, weekly rent is not available as evident in Fig 9, so I estimated the value. 

Fig 9: Preston based on Airbnb.com

Heidelberg West has 29 properties accessible for rent on the realestate.com for the agency-managed properties. The Heidelberg West map is indicated in the Fig 10.

Fig 10: Heidelberg West Map

For agency-managed property of Heidelberg West, weekly rent is not available on the realestate.com so I predicted the value.

Fig 11: Heidelberg West weekly Prices

For AirBnB-managed property of Heidelberg West, weekly rent is not available as shown in Fig 12, so I estimated the value.

Fig 12: Heidelberg West based on Airbnb.com

I have divided the properties into 50-50, such that 15 properties are controlled by the agency and 15 properties are owned by AirBnB and all have the same proportion of the distribution of the houses in each suburb. There are 5 properties in Bundoor, 5 in Kingsbury, 3 in Preston and 2 in Heidelberg West. 

Graph 1: Agency-Managed division of Houses  

Graph 2: AirBnB Managed division of Houses 

Nevertheless, the mode of pattern was cost per unit, since it is entirely controllable.

Graph 3: Housing Split between both properties 

 

 

PART 4: Demonstration of revenues

This part discuss the calculation of revenue of both types of properties i.e. Agency managed and AirBnB. For the first type of properties, data of weekly median rent is available for 2 areas i.e. Bundoora and Preston while data of Kingsburg and Heidelberg West is not available so I estimated the values. In the case of second type properties, all the figures are estimated based on the in-depth research because of an unavailability of data.

Table 1: Overview of revenues of Agency-managed properties  

15 Agency-managed	Division of Houses	Weekly Median Rent	Weekly Portfolio	Efficiency 90%
Bundoora	5	$523	$2,615	$2,353.5
Kingsbury	5	$450	$2,250	$2,025.0
Preston	3	$650	$1,950	$1,755.0
Heidelberg West	2	$460	$920	$828.0
Total	15	$2,083	$7,735	$6,962

 

Table 2: Overview of revenues of AirBnB managed properties

15 AirBnB managed	Division of Houses	Daily Rent	Weekly Rent	Weekly Portfolio	Efficiency 57%
Bundoora	5	$150	$1,050	$5,250	$2,999.85
Kingsbury	5	$125	$875	$4,375	$2,499.88
Preston	3	$140	$980	$2,940	$1,679.92
Heidelberg West	2	$120	$840	$1,680	$959.95
Total	15		$3,745	$14,245	$8,140

 

Based on the figure mentioned in table 1 and 2, it is highlighted that AirBnB houses appear to possibly make pointedly extra median rent per week in comparison with agency-managed houses and their lower efficiency figure backed in this regard.

 

PART 5: Demonstration of costs

This part involves the presentation of costs, including the money paid to real estate agents usually charged for maintaining rental possessions, and also the percentage that AirBnB receives from customers. Both types of property managed agent charged different fees like there is mentioned that real estate agent gets 10% while AirBnB charges are 3%. So it is clearly seen that AirBnB charges less fees. After agency fees for Agency managed properties is 

(100% – 10% = 90%)

AirBnB charges:

(100% – 3% = 97%).

Table 3: Overview of costs of Agency-managed properties 

15 Agency-managed	Weekly Portfolio	Efficiency 90%	After Agency Fees (90%)
Bundoora	$2,615	$2,353.5	$2,118.2
Kingsbury	$2,250	$2,025.0	$1,822.5
Preston	$1,950	$1,755.0	$1,579.5
Heidelberg West	$920	$828.0	$745.2
Total	$7,735	$6,962	$6,265

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Table 4: Overview of costs of AirBnB managed properties

15 AirBnB managed	Weekly Portfolio	Efficiency 57%	After AirBnB Fees (97%)
Bundoora	$5,250	$2,999.85	$2,909.85
Kingsbury	$4,375	$2,499.88	$2,424.88
Preston	$2,940	$1,679.92	$1,629.52
Heidelberg West	$1,680	$959.95	$931.15
Total	$14,245	$8,140	$7,895

 

PART 6: Overall net position

This section displays the final net stance of my industrial client, the total revenue excluding all costs. The following tables 5 and 6 indicate the fees related to the both types of properties.  In addition, the total value of the revenue is also mentioned in the table below. The total value of the revenue is for the period of 52 weeks.

Table 5: Net position of Agency-managed properties

15 Agency-managed	After Agency Fees (90%)	Yearly Total (*52)
Bundoora	$2,118.2
Kingsbury	$1,822.5
Preston	$1,579.5
Heidelberg West	$745.2
Total	$6,265	$325,798.20

 

Table 6: Net position of AirBnB managed properties  

15 AirBnB managed	After AirBnB Fees (97%)	Yearly Total (*52)
Bundoora	$2,909.85
Kingsbury	$2,424.88
Preston	$1,629.52
Heidelberg West	$931.15
Total	$7,895	$410,561.07

 

PART 7: Conclusion and Recommendations 

This part addresses the client’s conclusions and recommendations. Afterward making complete assessments for both categories of properties, it is clear that the AirBnB controlled properties seem to be more lucrative and of greater strategic value opposed to the agency-managed properties due to different factors like AirBnB charges just 3% of fees, while the agency manged fees is 10%, which is greater than 3 times of AirBnB charges. On the other hand, AirBnB’s aggregate net instance is also greater than the Agency-managed properties as seen in Tables 5 and 6. 

Thus, based on the above analysis, my recommendation to the concern costumers is to spend additional in AirBnB controlled properties as AirBnB charges lower fees opposed to the agency-managed properties and thus received higher revenue. To make a better profit, my client should break the house into 80-20. Thus, 80 per cent investment in AirBnB and 20 per cent investment in Agency-managed properties.