How to finance long-term rental apartments

In recent years, the long-term rental apartment market in China has been growing, and many brands have achieved multiple rounds of financing. Every successful financing will lead to a heated discussion in the industry, and more long-term rental apartment participants will begin to think about whether their enterprises can take this road. So how to finance long-term rental apartments?

A lot of money for long-term rental apartments comes from wealth management companies, and traditional commercial banks account for a small proportion. This is because most apartment operators have no property ownership, lack of credit support, and the platform income is also very uncertain. Most long-term rental apartment enterprises can only choose higher-cost financing methods because of different subjects, which is relatively risky and has fewer financing channels.

However, for some large-scale long-term rental apartment brands, they can not only get bank loans, but also get monthly payment concessions, rent installments and sales installments provided by banks. In addition, they can also issue trust products for equity financing. And these can also be financed in large enterprises through financial leasing and supply chain finance, which makes the capital cost of enterprises relatively low.

In addition to the above financing channels, ABS financing has also become the new favorite of the industry. It is the expected lease discount, and the accounts receivable are issued as fixed-income wealth management products in the public offering channel. Because there is no collateral, the income is uncertain and the risk is relatively high.

However, in the eyes of the industry, ABS is a good innovation project, but without long-term stable income, most of the income will be taken away by trust companies and asset management companies, and it is still difficult for operators to match the cost and income. On the other hand, due to the rich cash flow of long-term rental apartments, there are many products that can be securitized, and rent, decoration, deposit and service fee are all realizable links. Therefore, many enterprises now take the future rental income of mature projects as the basic assets, and realize financing according to the net cash flow of the projects, so as to meet the embarrassment that equity operators cannot obtain funds through traditional mortgage guarantee.

Asset securitization is an effective way to revitalize existing assets, expand scale and obtain profits. However, at present, many operators of long-term rental apartments have not reached the qualification to issue ABS and other products in a short time. However, if the relevant policies do not change much, the emergence of various new innovative structures will accelerate the financing of the industry, and it is expected that more asset securitization products will appear next year.

"Financialization" is still the main source of funds for long-term rental apartments in China at present. It is still unpredictable to operate "gold" by itself without solving the main risks and greatly improving the rent difference, operation ability and cost reduction ability.