A Starter’s Guide To CRE Investment

July 10, 2018

At the mention of “investment,” many think first of their stocks, retirement accounts or other traditional financial assets. While these options are a common approach for investing, there is another option that could be more effective: real estate investments.

Today, approximately 15 percent of Americans have invested in real estate outside of their primary residence. Under the right circumstances, these investments are lower risk, provide better returns and offer valuable diversification. However, two thirds of Americans believe investing in real estate is too difficult, too costly and too complex compared with traditional investment options.

In truth, commercial real estate investment does require some special consideration, but it’s not as daunting as it may seem. The industry requires the willingness to devote time and the effort to research and identify the right investment opportunity.

Building on the relationships and knowledge you already have can give you a strong start in commercial real estate. Make connections with other real estate professionals, investors and private lenders, as partnerships may be an advantage to your overall investment strategy. What’s more, many properties are sold without being listed first, so a wide network may give you access to off-market opportunities.

It’s also vital to align yourself with experienced commercial investors who can help you navigate unfamiliar situations, understand market terminology or evaluate properties. Contacts – such as the professionals at Intelica and Bamboo Equity Partners – can also assist as you track trends and capitalize on industry shifts.

While broad market understanding is important, the details of each investment property are key. For example, location is a primary concern as it pertains to current or potential infrastructure near a commercial property. Access to freeways, connections with public transportation, and proximity to additional business or community growth are valuable. If the location is properly selected, solid returns are more likely.

Due diligence demands that any property you seriously consider would be subject to a property inspection, appraisal, radon and pest inspection, as well as any other checks or tests required by law. In the case of commercial real estate, these procedures may be more expensive than a standard residential evaluation, but they reveal potential risks and costs that come with a particular commercial asset.

Solid financing further secures investment income through commercial real estate. Commercial loans do require a higher down-payment percentage than residential loans, but they also feature a bit more flexibility. As an alternative to traditional lending structures, you may even find that you can purchase multi-tenant properties with little or no money down through private investment partners. In either case, it is wise to establish a lending relationship before making offers, so you can negotiate from a more powerful buying position.

Combine a savvy property selection with sound guidance and the right financing options, and you can enjoy significant benefits through commercial real estate investment. What’s more, you’ll diversify your overall financial portfolio, reducing risk and maximizing returns. Contact Intelica if you’d like to learn more or investigate the potential investment opportunities in your market.