Commercial real estate encompasses retail, office, industrial, warehouses, and mixed-use apartment buildings. Investing in commercial real estate can create a number of advantages & potential benefits when it is understood and done right. One of the most important things to do before making any real estate investment decisions is to really do your due diligence to make sure the type of property you look to invest in aligns with your investment strategy.
Determining Your Investment Strategy
Cash Flow- Knowing what you need/want in terms of cash flow is very important. Are you able to carry property with higher cash flow but more risks or do you prefer low cash flow with more of a safety net? Which of these options is better for you & will make you most comfortable when investing?
Value Add On’s- Are you looking to purchase a property that is a “value add-on” property (a property that needs work). Whether it’s a complete renovation, deferred maintenance, or exterior landscape improvements you need to have an active strategy because there are a lot of moving parts. It is also a good idea to have a solid trustworthy local team in place when investing in add-on properties.
Holding Time- Also, another factor to consider when looking to invest in value add-on properties is hold time. Most value properties have a hold time of 1 to 3 years. Cash Flow properties on the other hand can be used to generate income for your next investment.
When investing in commercial real estate properties it is a good idea to invest in properties in “high appreciation” areas. Holding on to these properties also creates an opportunity when the market increases and you are able to raise rents respectfully. Also, take note to further investigate commercial property finance rates. Knowing all of the details before you look to invest ensures that you have thoroughly assessed your investment and investment strategy.