Advice - W. Darrow Fiedler

A market downturn can often be the opening you need to secure the commercial real estate you want. However, you’ll want to understand multiple factors that stand in between you from getting real estate at its cheapest point or getting it as it’s rising. Understand these factors skilled real estate investors use today when choosing to purchase commercial real estate.

Knowledge

Entering into a new market of commercial real estate that you haven’t dealt with before can be tempting if you’re looking for profits but you must stick to what you know. The reason you’ll want to stick to your knowledge is that you’ll be able to identify more easily properties that won’t bring you as much risk as going into a completely different industry. Over time, you’ll be able to even grow your knowledge of the industry you belong in by talking to other skilled investors. Ensure that you are always sticking with what you know when you are looking to invest in commercial real estate.

Local Experts

As you look beyond where you live, you might be tempted to invest in areas all around your country and around the world. It can be very profitable for you to split up your investments based on location but it’s key that you bring in local experts while doing so. Working with local experts will give you help in understanding key differences cities may have from one another such as real estate tax, how often property sells in a specific area, what type of people are moving in, and more. Make sure that you always partner up with local experts when looking to purchase commercial real estate in a specific area.

Historical Data

Over time, the pricing of real estate can change due to various market and city conditions but you must refer to historical data rather than just current data when purchasing commercial real estate. The reason for this is that you’ll be able to compare the previous prices of real estate that you’re looking for with more key information like how many people are moving into a city along with the type of businesses that would use your commercial real estate. You’ll just want to make sure though that you consult experts that can help you understand important links historical data can have in one area over the other. Looking over historical data before purchasing commercial real estate is just one of the many other ways you can make smart purchases.

Investing in real estate is a great way to add to your investment portfolio by securing a physical property that will net you returns in the future. Even so, the prospect of buying an investment property can be daunting for many people, which makes it much more appealing for a lot of first-time investors to go into their first deal with a partner. A partnership helps defray the cost of the investment, and it also provides a buffer for error by distributing responsibility across multiple parties, instead of just one. Still, there are a few aspects of partnerships in real estate investing that can be troublesome if both parties are not knowledgeable about potential pitfalls. Here are three aspects of real estate investing partnerships to be aware of before signing on the dotted line.

1) Who will supervise and pay for work on the property? Part of investing in real estate is often performing standard renovations to make sure that the property nets the highest amount of revenue when it gets put on the market. Before you put money down, have a frank discussion with your potential business partner about whose responsibility it will be to handle the work on the property – who is paying for it, who is supervising it, and who is completing the punch list once it has been completed. This conversation will help to inform both parties about their individual responsibilities, and it will save you an uncomfortable discussion later on if and when important details fall through the cracks.

2) How are you splitting equity? Presumably, the intention of investing in real estate is to increase its value and net greater returns on the property over time. It’s important to mutually agree on a split in equity before the property makes it to the market; if you wait until afterwards, you’ll automatically increase the likelihood that you’ll end up having an acrimonious, partnership-ending conflict over the split in equity later on, which could cost you not only a business partner, but also a significant amount of money.

3) What will you do if one party wants to leave the partnership? As with any business, it’s important to draw up a contract between both parties that clearly and irrefutably outlines what the terms of the agreement are and what will happen if one person decides that they no longer want to be involved in the ownership of the property. If you have a contract in place, then there will be no miscommunication about the roles and responsibilities of each person down the line, and there will be no conflict when one person decides to disengage, because you’ll already have a plan in place for this exact situation and others like it.

While it can be challenging to invest in real estate with a partner, it can also be infinitely more rewarding and significantly more lucrative. So, then, as long as you go into your business arrangement with open eyes and clear guidelines for the functions and division of labor for your business, you will set yourself – and your business partner – up for success in the rewarding world of real estate investing.

Real Estate Made Simple

Tag: Advice

When is the Right Time to Invest in Commercial Real Estate?

What to Consider When Investing in Real Estate with a Partner