Prior planning prevents poor performance.
“Most people who invest in rental or commercial real estate don’t spend near enough time thinking about what their intent is and what they expect, nor do they do enough research to help ensure a successful venture,” says Adam Whitz, Broker/Owner of RE/MAX Commercial Group in Lansing, Mich.
To help you determine which commercial sector – and ultimately, which specific property – to invest in, Whitz advises you to consider these things:
• What are you investing for? Retirement? A steady stream of income? Long-term growth? College funds for your children?
• How much cash do you have for a down payment?
• Where is your investment capital going to come from?
• What ROI do you expect?
• Do you want immediate income or a return years down the road?
• Do you have a plan for managing the property?
Without knowing the answers to these questions, Whitz says, you’re flying blind and have little chance of a satisfactory outcome. But once you have these factors in mind, you can get more serious.
A good first step is to contact a commercial real estate specialist. A trained, experienced real estate professional can be a valuable member of your team, which should also include, at the minimum, an attorney and an accountant.
“Most investors get caught up in the glamour of the transaction, but a good real estate professional can do the detail work that needs to be done,” Whitz says. “There are many commercial sectors to choose from – including retail, office, vacant land, manufacturing, warehouse, medical and multifamily residential. We can help you evaluate your specific needs and choose the right investment for you.”
Commercial real estate professionals also know their market.
“Is it an ascending market? Very few are right now,” Whitz says. “Of course, that doesn’t mean you shouldn’t invest, but you must go into an investment with your eyes open.”
You also must understand aspects of your market’s demographics – whether the population is growing or declining, the average age and income of the populace, and so on. And you must understand critical factors in the commercial marketplace, including economic trends, vacancy rates, lease/rental rates and so on.
In all these areas, a commercial real estate specialist can be a valuable guide and counselor.
“You know the old adage: Ready, Fire, Aim,” Whitz says. “That doesn’t work out too well. We can keep you from going off-track.”