Do want to be a smart commercial real estate investor? Here are a few tips for you!
Sometimes the best-looking property can actually be the most devastating real estate investment you may have ever undertaken. Remember that investing in Commercial property is based on the price, the terms as well as the ongoing return on investment.
Here are several tips for successful and smart commercial real estate investor.
How to be a smart commercial real estate investor:
As with any investment you need to ask yourself some basic questions:
- How much capital do I have to deploy?
- What is my desired rate of return to deploy the capital?
- When will I need this capital back?
- What is my risk tolerance?
Be an Investor and not just a gatherer of commercial properties. The reason you make investments is to get a worthwhile profit. Thus, if you purchase a property that produces little or no growth, then you basically acquired a property (rather than making an investment). Make sure you do the math. I also spend more time on the due diligence of the downside then the upside. If you remove negative events. The positive events come a lot easier.
How to be a smart commercial real estate investor. Hire the right team:
The right team can guide to your progress by saving you from making very costly mistakes; finding where and when you missed the required steps and ensuring that you in touch with necessary resources that you probably wouldn’t have direct access to.
How to be a smart commercial real estate investor is to have a plan:
Every Commercial property has a Lifetime.
One of the greatest mistake you will make as a commercial real estate investor is to disregard the fact you will need to spend some good amount of money on the maintenance of the building over time. At some point the building will need a new roof, or the electrical system might need to be upgraded. You also need to anticipate doing TI (Tenant Improvements) as tenants come and go. Every building undergoes these renewal phases at some stage. Therefore, make sure as a commercial real estate investor you have a lasting plan to cater for such repairs.
Focus on one commercial property at a time.
Especially if you are new, you should concentrate on one type of investment: Offices, Shops, Warehouses, or whatever you prefer. Each deal requires (and deserves) your total attention. As a matter of fact, it’s better to be leading in one aspect, than being average over many. After all who wants to be associated with average-performing properties anyway?
Get Protection on Your Investments.
As with anything in life, messy court cases can occasionally occur. Therefore, it’s important that you do everything within your power to protect your personality as well as your investment.
Ask yourself these few questions to decide whether you’re fully covered:
- How is your Commercial property protected – both legally and insurance wires?
- Are other investments wholly separated from each other?
- What do you stand to lose, if you are defeated a lawsuit?
- Is your personal property isolated?
Don’t be casual when you are answering these questions. Consult a lawyer to ascertain that you’re fully protected if ever you were to be sued.
For a Partnership or Syndicate, finance the deal using Non-recourse Finance.
Non-recourse simply means that actually you are not personally guaranteeing the borrowings. There are two advantages to this: It
permits you to be excluded from off the loan just in case the agreement goes sour. On another hand, if the property were to fail, the financier cannot come after you personally.
Once you understand the “Rules of the Game”, buying Commercial property is really quite simple. You just need to do a little homework and make sure you get the right advice along the way.
The number one key to being successful as a Commercial Real Estate Investor is?
To understand what you are there to do!
From our experience, this is the most critical phase. If you have a clear plan it is easier to deploy capital while still operating within a margin of safety.
The SWFL REIA is the premier place to understand what you are here to do, in relation to real estate investing! We look forward to meeting you at a meeting soon!
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