5 Investing Tips for Commercial Real Estate Beginners from Industry Leaders
With the warmth of the summer season on everybody’s mind, it’s natural for investors, especially those in commercial real estate, to divert their attention to new opportunities. Spring brings tax season, a time when investors assess their current holdings and plan for the future. Now, with the tax season behind us, investors are in the driver’s seat and ready to diversify their portfolio. This realization is as true for commercial real estate investors as it is for residential property holders.
In the United States, commercial real estate is big business. It’s also a category of potential investment that, based on owner type, covers a lot of ground. Property owners include individuals, LLCs, families, large corporations, insurance companies, financial institutions, government, real estate investment trusts, and religious institutions. Valued at nearly $17 trillion and covering an impressive 69.2 billion square feet, there are lots to consider for first-time commercial real estate investors.
Rather than feel overwhelmed, The Robert Weiler Company, a Columbus, Ohio-based full-service commercial real estate brokerage and appraisal firm, has taken the time to compile research related to this singular question: What is the one investment tip you would impart to commercial real estate beginners?
The Top-5 Checklist of Investing Tips for Commercial Real Estate Beginners:
When thinking about the question above, we realize that there isn’t a single answer. As such, we scoured the Internet to find out what various CRE thoughts leaders had to say. Here is our take on what commercial real estate investing beginners should consider before their first foray into the market:
Ken Roberts, Owner of M&K Roberts Properties LLC:
Do your homework. True to the American ethic, when it comes to investing in commercial real estate, self-reliance is key. Market data is also more accessible than ever, thanks to the Internet. In the context of this blog, doing your homework means that, before making an investment, research real estate findings on your own. Doing so will help you become more knowledgeable. And CRE brokers at The Robert Weiler Company love partnering with investors who share their passion in understanding the market.
Source: Direct correspondence with Skip Weiler via LinkedIn
Ari Afshar, Founding Agent at Compass and Member of the Forbes Real Estate Council:
Invest in properties near renovated buildings. Essentially, this is the broken windows theory in reverse. The broken windows theory is used in policing; the idea is that limited urban decay – a shattered window, unkempt lawns, damaged sidewalks, etc. – encourages further degradation. Renovated buildings that attract pedestrian traffic or include shopping opportunities and eateries have a reverse, upwardly improving effect. When looking to invest in commercial real estate, Afshar explains that “Rehabilitations of prominent structures, i.e., a disused fire station, vacant commercial property, or any other civic structure, is a harbinger of future commercial development.”
Tim Johnson, Senior Managing Director at Blackstone Real Estate Debt Strategies:
Geography matters. Most of us have heard the clichéd phrase, “diversify your portfolio.” But the phrase still has merit. When investing in commercial real estate properties, think about investing in a wide geographic area. If you’re reading this blog in Columbus, Ohio, don’t limit yourself to the greater Columbus region. Branch out. We have! The Robert Weiler Company works on projects throughout Central Ohio. You may also want to look at improving cities throughout the Midwest. For instance, Detroit’s Downtown and Midtown neighborhoods continue to experience rapid growth.
Doug Marshall, Founder and President of Marshall Commercial Funding:
Plan to plan. Just like your grocery list, it helps to know what you want before you go out shopping. We call this planning to plan. Ask yourself: What do I want in my commercial real estate investment? How far are you willing to travel to inspect it? If you’re considering a rental property, for instance, what are the unique qualities you want to have? Contemplate your involvement: Are you just a passive investor, providing the equity needed to purchase a property, or are you planning to be more involved? If the latter is true, consider being no more than an hour’s drive from the property. As with other tips, don’t limit yourself to one geographic area (provided you are a passive investor) and invest in urban, rural, and suburban areas, too. Doing so can lead to significant financial and intellectual/emotional rewards.
Graham, Langlois, & Legendre, LLC (CRE Brokerage Firm Based in Baton Rouge, LA):
Line up multiple revenue streams. Several tips remind readers to diversify their geography and differentiate the types of commercial real estate investments they make. The tip for building multiple revenue streams broadens the idea of diversification further. Passive income is, without doubt, a great way to make extra money. However, if it’s the only type of investment that you have, all it takes is one broad-spectrum hit to the market, and you could find yourself in a challenging financial position. There are many ways to invest in commercial real estate, whether via bonds or REITs. Make sure you speak to your commercial real estate broker and financial advisor to discover all of the possibilities.
Now? Never? Never Again? When to Jump Into the Commercial Real Estate Market:
One of the most fundamental questions this blog post has yet to answer is equally important: When should you get started with investing in CRE? One way to answer that question is by measuring the total transaction volume.
How many commercial properties for sale are being bought and sold in the US? Also, how does that figure compare to other years? Here the mantra, “buy low, sell high” applies. Commercial property research publication, Bisnow, reported in the fall that the first half of 2018 saw a 4 percent increase in deal volume. That said, overall transaction volume has decreased since its peak in 2015. Most experts agree we are at the top of the market in terms of transaction activity.
While The Robert Weiler Company has no crystal ball, the first half of 2019 might be an excellent time for commercial real estate beginners to jump into the game.
Throughout our company’s 81-year history, our team of commercial real estate advisors has dedicated their time, energy, and passion to educate both investors and residents of the greater Columbus, Ohio area on all matters related to commercial real estate. Each decade has brought a new way of thinking, a different market, and an opportunity to blend our continued expertise with a splash of innovation.
Today, three generations of family leadership bring credibility, local market know-how, and financial savvy to everything we do. That’s why we’re best prepared to partner with you when making crucial commercial real estate investment decisions. You’re one step closer to success with these valuable investment tips for commercial real estate beginners. Now, get in touch with our team at 614-221-4286, and set yourself on the path toward a greater ROI.