In the mix of investments, commercial real estate always has a place, because it is important to the vast majority of America’s businesses. Nearly everyone owns or aspires to own commercial real estate and those that own it want more creating an environment where investing in it can really pay off.
The US commercial real estate market that for so many years had been moribund has now come roaring back with dozens of markets around the US overheating and some markets like Seattle and Los Angeles hotter than ever.
History shows that real estate investing can be a path towards greater personal wealth, but there are plenty of potentially bad decision one can make, which is why it is imperative to learn as much as you can about the business of commercial real estate and to consult commercial real estate experts like Joe Johnson Welfont who can help steer you toward high potential commercial real estate purchases. Here are some tips to get your thinking about the subject in line with realities:
Make a Business Plan for yourself
Approach investing like you would any other business and a business needs planning. Lay out a list of the financials needs to invest and compare that with what you have on hand and can secure. Take a look at the cost of the money you will be investing. Will you be taking out loans? If so, you need to deduct any interest you will be paying against your projected returns. What is your timeline for investing? Are the properties actually available for you to purchase. Putting together a plan will demand that you do some legwork, get into the marketplace and talk with people. This feedback will be invaluable for you getting a clear understanding of what you are up against and how best to proceed. At the end you will have a winning plan.
Use your head not your heart
Buying commercial real estate should be based on business not on personal preference. You can often find beautiful properties that wow you with their amenities and location, but do not offer the desired return. This is a big mistake. Investors sometimes think they can foresee the property turning around because it is just so great. This is a mistake. Sometimes there are intangibles in a property that make it no able to rent, or that keep its value low. Maybe it is in an area with too many other properties, perhaps it is a warehouse without the zoning it needs to attract the right type of clients. There could be any of a number of reasons, but the bottom line is there probably is one. Do not second guess the market, move on.
Become an expert on a few types of properties and stick with them.
There are dozens of types of commercial properties from warehouses to office buildings to farms and each has its own particular set of factors that determine whether it is an investable property. You cannot know all of the idiosyncrasies of each and you should not try to either.
Become an expert in a few types of properties and stick to investing in those. If you like downtown office parks, get to understand the market, what is happening with businesses in that marketplace, how the local economy is doing and how that type of property you are looking at typically does in the type of current and future marketplace. If you are looking at properties in growing parts of the city, understand where the growth is projected to happen and what the projected rental rates are for that part of town. This information is available you only need to seek it out.
Take the time to incorporate these few steps into your real estate investing ideas and they will greatly improve your chances for success.