Most millionaires and billionaires have real estate investment holdings. In fact, as a major asset class, real estate investments can be very profitable because you can leverage your assets to increase your investments. You can increase your net worth while gaining a passive income. However, many who are just starting out in commercial real estate investing make a few common mistakes. Therefore, consider these investment tips.
Build Your Team
Every real estate investor, whether they invest in commercial or residential real estate, should have a strong team. Your team should consist of real estate agents and mortgage brokers, a property lawyer and an accountant. You may also include contractors who provide diverse, quality services at a reasonable rate and with a quick turnaround time. However, your most important team member will be a mentor. Choose someone with extensive experience, and success, in commercial property investment.
Do your due diligence when you build your team. Choose friendly, knowledgeable, experienced individuals who are at the top of their fields. You should have a fully formed team before you complete your first purchase.
Research Your Market Metrics
Before you start investing, review key metrics. For example, look for the vacancy rate on the type of property you hope to invest in. If you plan to purchase an apartment complex that is at capacity, this may be a great investment. However, if seven other apartment complexes are being built in the same area and your prospect was built in the 1960s, you may find it challenging to maintain your occupancy rate in the future. However, demographic changes, such as population growth may counteract this challenge. You should also look at average income and debt.
Not Every Market Is the Same
The performance among markets will vary widely. For example, investments in Los Angeles, CA perform very differently from those in Austin, TX. In addition, large and small cities have unique trends. Therefore, it is vital that you fully understand the market you intend to invest in. Starting with your home town is a great strategy, but don’t take anything for granted. Do your research to learn about demographics, construction rates and other factors that affect the commercial real estate market. Then, research historical changes in the community. For example, have prices consistently increased or have there been dips? Why did prices dip?
Property investments are typically considered profitable. After all, people need places to live, work and shop. Start your commercial real estate investment journey the smart way by building a strong team and learning about your markets and metrics.