Commercial real estate investment has lots of benefits, such as extra cash flow, the abundant market of good and affordable properties and bigger payoffs. However, making a successful real estate deal is more easily said than done. There are many things that should be kept in mind while considering buying or selling a commercial property. Many deals fall off in between due to the lack of proper homework. Since these are difficult times for business, every step should be taken with complete precautions and preparation.
Getting started as a real estate investor
To get a successful commercial deal, first you will have to jump into the business of real estate investment. These are the points that should be kept in mind before making your move:
• Plan and work accordingly
Make a list of all your real estate investment plans and jot down them on a piece of paper. Those who have a clear visual of their goals have a better chance of succeeding than those who work by the instinct. Your goals could be anything ranging from the amount of money you intend to make from real estate investing at the end of each month to a particular number of properties you want to buy or sell. These goals should be measurable. Also, keep records of the progress being made.
• Research, research and more research
Before embarking on your journey as a realty investor, you need to do a complete study of the market where you want to invest. Instead of taking huge strides, take small steps by studying a particular area of a town or city and try to concentrate your efforts in that area only. This way you will get familiar with the tricks of the trade without getting too overwhelmed with the sheer expanse of the real estate market.
• Plan your exit well in advance
All is well that ends well, this idiom is perfectly suited for a property investment. You should have an exit plan ready for the property you are investing in even before purchasing it. Are you going to hold the property for long-term or do you intend to sell it quickly in the hope of making a nifty profit?
What makes a successful real estate deal?
To know that whether the deal you have made is a success or not examine it on these five data points:
• Cash Flow: Always measure how the property is going to perform in terms of cash flow in comparison with other properties to have an idea whether you have made a good deal or not. There are lots of factors that affect the cash flow of the property such as local rental market, interest rates and the amount of your first down payment.
• Appreciation: This one is a little tricky since there are multiple factors involved. Experience will teach you to make the right purchases in the right neighbourhoods. Timing a real estate cycle is not only difficult but also very risky due to speculative nature of market. The safe game is to invest for moderate to long-term period of time. (10-12 years).
• Risk: Not many real estate agents consider this as a decisive factor in their investment decisions. However, there is always a possibility that all your assumptions turn out wrong and you are left with very few options. It helps to have a plan B in place for such times. Expect the best, but always be prepared for the worst.