Maslows hierarchy of needs is a theory in psychology proposed by Abraham Maslow in 1943. The largest, most common, most fundamental needs being at the bottom of the pyramid, and each need must be meet and satisfied before any human can move up into the next level of needs.
The key point here is not the pyramid itself (as Maslow apparently never even used a pyramid to explain his theory), but that the most basic level of needs must be met before the individual will strongly desire (or focus motivation upon) the secondary or higher level needs. There has been much researched and written on the topic and the fundamentals behind “motivation” and how it relates to moving up and onto the next level of the pyramid.
What has this got to do with global real estate investors?
In short, it has everything to do with them, although we will need to put it in relative context. It is something most real estate developers do not understandand something that all investors should be aware of.
InvestaCrowd has investors from 20+ countries so this is the InvestaCrowd theory of “Real estate investor’s hierarchy of needs“, in order of importance we then have:
- Type of deal
If the economics, political risk, currency risk and general investor protection climate of any particular country is just not there, then forget it, game over, bin the deal and discussion.
If the country ticks the box, but then you have a project in a tier 2 or 3 city, that foreign investors have probably never heard of, then forget it, game over.
If you manage to fulfil the needs of investors and tick the country and city boxes but the developer/sponsor has no proven track record or is not willing to invest their own capital into the project, then go home, its over.
If you have made it this far, congratulations, now the deal needs to be simple and easy to understand. Investors will look across asset classes, but if the deal is twisted and complicated, RIP. Think KISS theory, Keep it simple, stupid.
The biggest misconception developers and sponsors have comes last, and why is this???? because, last on the list (and not 1st) on the importance of investor needs is the actual return itself. If the project cannot make it through to level 5, it doesn’t matter what return your project is offering, investors are out. 10,000% returns in Antartica just won’t sell.
The above is relevant for developers and just as important for investors too. Good locations offer good liquidity. There is no point investing into real estate that you cannot sell. Appreciation of real estate investments are generally paper gains until you exit and sell, so if your project is too far out there, it is too hard to sell, just ask someone trying to sell a real estate investment in a mining town in Australia how that is going to day.
If you study the last few years of real estate pricing across major global markets, like London, Vancouver and Sydney, you have seen rapidly increasing prices in markets that were already holding the top positions on every research list and report as the “most expensive and unaffordable”cities in the world, but, they still showed some of the strongest price growth and continue to do so, 99% of foreign investors in Canada want Vancouver, Sydney in Australia and London in the UK. InvestaCrowd’s investor hierarchy of needs proves this theory true. So does that now make it the “InvestaCrowd Law of Investor Needs” ?!.
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