In the dynamic landscape of real estate and investment, innovative models are reshaping traditional paradigms, offering both property owners and investors novel avenues for growth and expansion. One such transformative approach is fractional ownership, a concept revolutionizing property investment by allowing multiple stakeholders to collectively own shares in a single asset. To delve deeper into this groundbreaking concept and its implications for the real estate sector, Fintech Watch had the privilege of sitting down with Pranav Dangi, Founder and CEO of The Hosteller, an esteemed network of backpacker hostels renowned for its unparalleled vacation experiences.
With a keen understanding of the evolving needs of both property owners and investors, Pranav sheds light on the intricacies of fractional ownership and its potential to democratize access to real estate investment. Moreover, he offers insights into the distinctive nature of revenue-based financing, highlighting its non-dilutive and flexible characteristics that provide entrepreneurs with a unique avenue for growth.
Join us as we embark on a journey to unravel the nuances of these innovative approaches, exploring their transformative potential in shaping the future of real estate investment and business operations.
Edited excerpts from the interview
How does the Fractional Ownership Model in real estate work, and what are the key advantages it offers to both investors and property owners?
Real estate and fractional ownership models complement each other quite well. With the skyrocketing prices of real estate, it has become an asset class that is out of reach for many retail investors. Fractional ownership in real estate involves multiple parties co-owning a property. Instead of a single individual or entity owning the entire property, several investors collectively own shares or fractions of the property.
From the property owner’s perspective, fractional ownership helps to increase competition among buyers, makes exits easier, allows for higher utilisation of assets, and diversifies income resources.
From the perspective of investors, fractional ownership reduces the cost of entry, provides diversification in the asset class, offers professional management, and even has the potential for appreciation.
Can you elaborate on the characteristics of Revenue-Based Financing, emphasising its non-diluted and non-equity nature and how it provides a distinctive investment avenue for individuals?
As a business owner, it is important to have a tool that allows for expansion without having to give up too much ownership. Revenue-based financing is a great solution because it is linked to your business’s performance (revenue, GMV, etc.) instead of a repayment schedule in a pre-defined period. This provides flexibility for the business to grow and mature at its own pace while maintaining complete control over operations.
Our investment model is designed to offer a competitive return on investment for individuals with regular cash flow. It is a passive investment model that is backed by real-world assets. The return of money invested is higher than alternative methods of investments available in the market.
What are the driving factors and benefits of undertaking a capex-to-opex Opex Transformation in business, and how does this shift contribute to a more flexible operational approach while reducing fixed costs?
Undertaking a capex-to-pex transformation in a business means moving away from making large upfront capital investments and essentially turning them into operational expenses. This shift is driven by several factors, including capital efficiency, flexibility, risk mitigation and the ability to expand faster and scale more easily while keeping focus on core competencies. It is only advised to turn a capex into an OPEX model where businesses have high operating margins.
In the context of Fractional Ownership, how are decisions made regarding property management and major decisions related to the invested properties?
Under the company’s fractional ownership model, we are responsible for the selection of an asset and the day-to-day operations as well. The management of entire operations is taken care of by the company while also being responsible for maximisation of revenue.
It’s a hassle-free investment for the investor as it becomes a passive investment for the individual giving him/her the flexibility to not invest time or energy in capital maximisation.
Could you provide examples of industries or businesses that have successfully implemented the Capex to Opex Transformation and what challenges or considerations are typically associated with making this shift in business models?
Asset leasing has been a part of our ecosystem for a long time but it has recently gained popularity and undergone significant changes in its models. Brands like Bluestone, Blu-Smart, and Wow Momos have adopted this model to pursue a growth path.
In principle, any D2C brand that is cash flow positive and does not aim to burn money at a core level can follow this path. It is ideal for a company to expand at a pace that does not dilute the quality of its offerings, while also having the possibility of growing its brand reach with adequate non-diluting capital.
Disclaimer: The views expressed here by the author are his own and do not reflect the views of Fintech Watch