5 Tips for Commercial Real Estate Investment
harkins / April 20, 2016
If you’re an entrepreneur looking for a new investment, you might be considering investing in commercial real estate. But like with any other investment, it’s important that you make an informed decision. When making the move into commercial real estate investment, it’s important to know how and where you want to invest. Here are five things to consider when making the decision whether or not to invest in commercial real estate.
Consider Being a Lender
When most people think about commercial real estate investment, they think of owning and managing the property. But if you don’t have the time or experience necessary to successfully manage the investment, you could loan money to other real estate investors who would do the hard work for you. Additionally, generally the property itself will be put up as collateral so if the investment is successful, you’ll make a solid profit. If it’s not, you might be able to sell the property for more than you paid for it.
Consider the Liquidity
If you’re going to invest in commercial real estate, it’s important that you’re all in for the project. Make sure that you’re aware of the cash flow implications of your investment. Investing in real estate can come with significant down payments and may force you to make multiple year bets on the market. If this doesn’t sound like what you’re looking for, you might want to consider a different investment.
From the outside looking in, investing in commercial real estate might seem attractive to the passive investor. But managing a property as the landlord can be quite overwhelming and cause a great deal of stress. If your investment requires ongoing management, make sure you’re aware of all that you’ll need to do for the property.
Understand the Market
Deciding to invest in commercial real estate is just the first part. The next step is to decide where you want to invest. There are several questions that should be asked to better understand the market. How are the job prospects? Is it an area that relies heavily on tourism? Will the weather play a factor in the investment? Answering these questions will ensure that you choose the right market for your investment.
Make Sure You’re Committed
Before making the decision to invest in commercial real estate, make sure this is the investment you want to make by considering other options. Managing real estate investments can be very time-consuming and hiring someone trustworthy and effective to manage it for you can be tricky. If you’re committed to the investment you’ll be fine but if not, you might be better off investing in a stock fund.
Commercial real estate investment can be a profitable endeavor for an entrepreneur but there are some things you should consider before making your final decision. These five tips will help to ensure that you make the right decision and are prepared to manage the investment. If commercial real estate is the investment you want to make, Harkins Commercial is here to help.
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