5 Financial Tips for Making Investments in Real Estate

Wednesday, May 13, 2020, 6:00 AM | Leave Comment

Maintaining a diverse investment portfolio lessens your risk and gives you more opportunities for rewards.

Real estate is often overlooked in favor of the stock market or cryptocurrencies, and overlooking real estate as an investment is a mistake.

Here are some tips that you need to know about making investments in real estate.

5 Financial Tips for Making Investments in Real Estate

  1. Consider the Size of Commercial Space

    When you are considering commercial real estate investing, think about the square footage of the property. If the property has a large warehouse, find out how many other large warehouses are in the area. If there are already a lot of large warehouses, and several of them are vacant, this might not be the best choice. If the property could be subdivided into smaller units in order to fulfill a need for medium or smaller storage spaces, then this could be a good investment.

  2. Think About Where Peak Values Could Be

    In most of the country, real estate values have been on the rise for about 10 years. Some markets have been very hot, with places such as San Francisco, California, Columbus, Ohio and Charlotte, North Carolina seeing double-digit growth in many years. However, this unabated growth may not continue for long. Consider where the peak is likely to be.

    Investing in a market that is at or near its peak will not deliver much of a profit. Look for a market that is still on the upswing and far from its peak. Emerging neighborhoods are a good choice. Find out which neighborhoods are on the rise. You can tell by more rehabs, increased building of apartment and condo units, more retail and increased traffic levels. Buying commercial space in an emerging neighborhood could be an ideal investment, so long as you do your research on the particular parcel of property, explains Forbes.

  3. Don’t Be Afraid to Consider Smaller Markets

    When many people think of real estate investments, they think of cities. Metropolises are not the only places worthy of your investment. Suburban and even semi-rural properties could also make a good investment opportunity.

    Many small markets have yet to rebound from the Great Recession and low property values of 2008. These markets represent an ideal investment opportunity. The prices are still low, so there is almost no risk of you losing your money. If you choose a small market, your chances of a bidding war are next to nothing. When looking at small markets, focus your search on the property’s location. Easy access to transportation routes is a key factor.

  4. Research the Local Sources of Jobs

    A small market with only one major employer could be a riskier investment. If that one employer is a lone manufacturer or big box store, and the location closes, you might not be able to rent the property. A small market with several sources of jobs could be a better choice.

    The COVID-19 pandemic has slowed business growth in many places, and businesses may need to change how they do things when they reopen. For example, places that produce items for sale may begin switching to a curbside pickup or even online-only model of business. If they switch to online-only, they might need more warehouse space instead of a storefront.

    On the other hand, some businesses are doing well even with the COVID-19 restrictions. Grocery stores, home supply stores and hardware stores are all doing brisk business and may be looking for larger retail spaces in order to accommodate social distancing and safe working conditions.

  5. Do Your Due Diligence

    Avoid buying a commercial property if you are going to have to sink a lot of money into it before you can rent it. You might not recoup your expenses. Some repairs are the nature of investments. However, if you find out that the site has hazardous materials on it, or it needs an entirely new sewer system, beware. Have the property fully inspected and vetted before you buy it.

When you invest in real estate, think of it as a long-term strategy. Do your research, and know how to recognize a good opportunity or good deal before signing your name on the dotted line. Adding residential or commercial real estate to your investment portfolio is a good strategy for growing your money.

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