Commercial real estate is one of the most reliable investment opportunities.
But before that, you may need to know a lot of things to achieve the highest ROI possible. Be sure to do your research and ask yourself some important questions, before moving forward with your latest investment.
1. You looking for cash flow or appreciation?
You should consider wisely and make sure you want money back either through cash flow or appreciation. Investments with the highest ROI can create value through both appreciation and cash flow, in certain cases.
It's important to know if you're planning to achieve a strong ROI through cash flow or appreciation. This distinction will affect the type of properties you choose (e.g. factories, shop lots, warehouses, offices). There are pros and cons to each type of investment.
In summary,
Cash flow investment: Brings in regular rental income and has lower risk when compared to appreciation investment.
Appreciation investment: Takes more time and has slightly more risk, but it allows for more flexibility.
2. Do you need liquidity in your investments?
One of the least liquid types of investment is real estate. This means it's difficult to exit the investment if you realize you'd like the money you invested back.
If you're worried about having your money tied up for years to come, you may start to consider more liquid investments than commercial real estate.
You may consider investing in stocks, which is typically a much more liquid investment.
3. What is your risk tolerance?
No investment is 100% safe and no risk at all. Commercial real-estate investing is reliable, but there is some risk involved.
Before entering an investment, it's important to know your risk tolerance. If the market goes down for a while, will you be able to remain afloat financially while you wait for the market to recover? For instance, Malaysia MCO around 1 year and 7 months, during this period, many physical stores cannot remain at their business expense and chose to shut down their business.
If you wouldn't be able to support yourself in the event of a market downturn, you should consider low-risk investments.
4. What are the market trends?
Being a successful investor, you should understand the market trends. While you can look at global trends, it's also essential to look at the trends in your specific area. For instance, if you wanted to invest in commercial real estate in Sri Petaling, you should know some market trends and details about the area such as property price, market price, traffic, safety, accessibility, and more.
The type of area you're investing in will have a significant impact. Be sure to research global and local trends before making your final investment decision.
5. Which type of commercial properties will you enter?
There are many types of commercial properties you can target within commercial real estate. Are you hoping to own shop lots, offices, warehouses, factories, hotels or mixed-use space? Each commercial property has its own needs and market trends.
Not all investments are equal, so do your research before moving forward.
Still concerned about making your first (or fiftieth) commercial real-estate investment? We are here to assist you, to help you make smart, educated investment decisions.
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