Peter Kovalenko: Portrait of a Russian investor (transcript of a report)

Understanding the clients’ peculiarities and your target audience is a key to success in any business. Peter Kovalenko, the head of regional foreign property sales department, Intermark Savills, has reported on the specifics of Russian overseas property investor on the INFOREAL Congress.

First I would like to mention that the number of transactions and budget are usually left undisclosed. Under the Russian laws, property transactions ought to be registered in the country where they have been inked. Accordingly, there is no trace of the deal left in Russia. So, a logical question arises: why work with a mediator in Russia, if you can directly contact the Russian-speaking realtor on the spot, thereby leaving no traces in Russia? Thus, first and foremost, discussing the portrait of Russian investor, we should note that he does not want us to know his portrait; moreover he doesn’t want it to be discussed.


The distinction between a simple buyer of foreign property and an investor

It is easier to work with investors, since they are focused on digits and can often set aside such details as the view from the window, interior, etc. Investors operate with dry information and make decisions independently, ideally they buy property just like they purchase securities - without emotions.

If formerly people used to acquire overseas property as a “distant country house”, because they had a surplus of funds, then now these purchasing objectives will fade into the background as the buyers would have less surpluses, which means that the concept of selling overseas property changes.


Portrait of an investor

1). Nearly 30% are professionally trained investors, who want to diversify their assets. Typically, these are people with vocational education, who gamble on stock market and are financially literate. They handle the transaction professionally. They do not go on property viewing tours, buy real estate without unnecessary emotions, and approach the solution scientifically. They are willing to pay lawyers a few thousand dollars for a due diligence of the market and the property unit. They are always looking for additional sources of information: Reuters reports, foreign publications, etc.

Pros: usually these are wholesale customers, who are ready to buy whole floors. They are ready to attract financial instruments (mortgages, credits, etc.), that is, they know how to get the required amount, and most importantly, are able to do so.

Cons: it takes a long time for this category of customers to make a decision – before they perform a due diligence, read all the Reuters reports - several months may pass. These clients do not enjoy buying and are quite skeptical towards new markets. There is virtually no statistics on transactions with such investors.

2). The second group are occasional investors. People who have a positive experience of purchasing property abroad, or those who have assets in Russia, but would like to have assets on more stable markets. That is, the client is perfectly fine, and he does not need to earn money, but understands that it is impossible to remain on one market for a long time, and he is ready to withdraw everything form Russia, and transfer his money, for example, in France, get a stable 5% rental yields, etc. In fact, occasional investors want to have more stable assets.

Pros: these customers have experience in purchasing property and are ready to buy more. They can quickly make a deposit because they have cash savings.

Cons: have no official income, respectively, can not get a mortgage. They are poorly educated in markets, so it takes a lot of explanatory work to persuade them.

3). The third group are false buyers, false investors. They account for even more than 30%. These people love to learn. They are ready to attend seminars, gain new knowledge. Frequently they ask us to translate all documents into Russian. These people are brawlers by nature. Their task is to avoid being exposed as false investors. These clients collect negative information in the Web, then print it out and show us. The main plus of these clients is that they always keep you concentrated.


Cooperating with the developer on exclusive terms

Intermark Savills tries to work with the developer on exclusive terms. The good thing about that is if a customer wants to deceive us and come directly to the builder, then within five minutes we would receive a notification e-mail on that matter. Of course after that, everyone would feel awkward, but the incident will be over.

First of all, builders pay attention to the history of success. However, this is the thing that little Russian real estate agencies can boast of. Working conditions and technology are completely different on domestic and foreign market and this complicates the business of our companies abroad. Yes, it is extremely difficult get an exclusive cooperation but if you did something well, have successfully realized a project or two then the developers will line up in the queue. Why would developers offer you exclusive cooperation? The fact is that they want to work with a reliable partner. Imagine: a developer arrives to a Russian exhibition, not knowing the language, sees three thousand companies, among which he must choose a business partner. And how can you trust a stranger, if there is no association of professionals working with overseas property in Russia, and the market itself is incomprehensible and lacks transparency?

How can you get an exclusive cooperation? First of all you must have a story of success, known to everyone. Secondly, you need to remember that the Russians are generally not trusted. Accordingly, you must have a certain corporation, association, guaranteeing the seriousness of your activities. That means if you do not have a name, then of course you cannot just walk out of the blue, approach the developer and say “Hello, I want an exclusive”. That just wouldn’t work out. And this is a universal thing; it’s the same in any business.

A narrow specialization is extremely important in this activity. Take a look at how you work with Russian property: you call an agent, tell him the name of the street, and specify the house and then he tells you everything about this house, including who owns which apartment. The agent is a specialist, and it that’s what you pay him for. Now look at Russian market of overseas property. How was the situation developing during the peak? There were some absolutely abstract, unexplored countries; people were “hopping in” this new business without any preparation, without training.

If, during the first five minutes of conversation, a person feels that you do not possess the required information – he will go to another specialist. When you are a true professional, people would come back to you even if you charge a commission for you services. If you have simply decided, on a number of reasons, to work in this domain without getting proper training, you will not be able to make an impression and will not receive any payment.


Forming a company image in the eyes of an investor

Magazines. I have a positive attitude towards advertising in glossy magazines. You can bookmark a page and in the course of conversation show it to the client with the words: “By the way, that's written about us”. This creates good impression, and the more prestigious a journal is, the greater the effect. It really helps if there is some initial information, then the glossy magazine strengthens it, and customer returns. Here's a classic situation from my practice: the client surfed the web reading about the project in St. Kitts & Nevis, then his friend, who was flying first class, saw a magazine, read an article called him and eventually they came together to our office. Of course, a glossy magazine can not explain everything, but it is a kind of quality mark. Moreover, that’s how people feel about advertisements and articles: “You have paid, that means that you are a respectable company”. Gloss - is an indicator of success.

Web-mailing. Judging from our experience I may say that if a person has no e-mail, then it is extremely difficult to work with him/her, because forwarding contracts, sending documents, communicating – this all happens on-line. If there is an e-mail - there is connection, the client receives newsletters, becomes interested in new projects and finally makes a purchase.

Seminars. People got tired of information, which is completely unsubstantiated. A tête-à-tête meeting is extremely important for the successful transaction, and seminars give you the opportunity to personally meet with potential clients.