What Are Your Real Estate Investing Goals
Whether you are a current commercial real estate investor or you are looking to put your hard earned money to work for you, it is essential for you to have well-developed investment goals for your investment in real estate. As with any investment you need to go into it with an expectation of its risks and returns and how you measure your success. There is great potential to make a great return on a commercial property if you know what you carefully create a plan for the investment.
While a commercial real estate investment plan can take many forms, there are three crucial components: the length of time you are going to hold the property, the risk profile of the property, and the type of property it is.
How long do you plan on owning the property? Maybe you want to flip it in a few years, or maybe you want to hold it for decades and collect the income as an annuity.
The length of time you hold a property will change the way you go into the investment. If you are a hands on value-add investor you may be buying an older, possibly obsolete or dilapidated building, fixing it up, putting Tenants and then selling it as a stabilized investment for someone else. In this case, the commercial property you buy would need to be priced appropriately to execute your investment plan, well located and the type of property in demand within the geographic area and economic cycle. If you are looking for the long term hold, coupon clipper, type of investment you may want to buy a property already built with Tenants in place so upon purchasing the property you have immediate positive cash flow.
What type of property selected to purchase determines how risky the investment is. The value-add investment where renovating and/or re-tenanting the property can harbor hidden expenses and problems that could cause budget overruns or competition from nearby properties can make leasing or selling your property difficult or put negative pressure on your pricing and therefore your investment riskier however these value-add investments typically provide a higher ROI than the coupon clipper where the property is up to date and there is in-place immediate cash flow upon purchasing the property.
When it comes to commercial real estate, there are a few general property types and then several sub-types within each. Those general property types are retail, office, industrial, and flex. Most of these are self-explanatory, but flex is the often misunderstood type of property. It can be used in a variety of different ways such as warehouse, manufacturing, office, etc and therefore it gained the name “flex” space.
There are many reasons an investor pick one property type over another such as the economic cycle, personal preference, personal comfort and the required attention needed to be given to the investment.
Where do you see the market heading? Manufacturing has slowly been on the rise and the e-commerce economy is creating an even greater need for distribution centers. Both of these trends has created an increase in desire and investment in industrial real estate while the e-commerce economy has made many regional shopping mall investors need to reinvent the shopping experience. Professional office space has shrunk on a square footage per person basis due to technological advances including computers and digital storage in lieu of paper and files. Medical office space is in higher demand with higher technological needs for medical record sharing. These are just a few of the factors that affect property type performance all while coupled with regional knowledge because real estate is still about location, location, location.
Whatever type of property you prefer, make sure to do your research and know what you are getting into or call the group at Blackwolf Commercial for a personal consultation.
Mastering Real Estate Investment Goals
The decision of how long to hold the property, how much risk to take on, and what type of property to buy depends on your personal risk tolerance and what you want from the investment. This can be complicated and take a lot of industry expertise, so it is best to talk to a company that specializes in this. Blackwolf Commercial specializes in finding you the perfect commercial real estate investment goals for what you want. Don’t know where to start? Give us a call, and we will be the experts you need to make the most out of your investment.