How Important is an Investment Strategy?

AS WITH ANY INVESTMENT you make – be it shares, property or collectables … you need to know where you are heading. And also ensure you have a solid foundation, upon which to base all your decisions.

Therefore, the obvious answer to this question is: Yes! And even more so, with commercial property.

It all comes down to the choices you make.

Sometimes the best-looking property can actually turn out to be the worst real estate investment decision you’ll ever make.

In essence, investing in commercial property is mainly about the price … the terms … the ongoing return … and being able to add value to your investment along the way.

As such, you need to approach each and every opportunity with a clear strategy, and realistic exit plan. And so, to help you formulate your own approach … here are a few tips for becoming successful with commercial property.

Don’t merely Accumulate Commercial Properties.

The reason you make investments is to produce a worthwhile profit. So if you end up buying a property that produces little or no growth, you’ve basically bought a property (instead of making an investment).

That’s part of the reason for having a mentor … so you’re able to benefit from that experience.

You’ll quickly discover that mentors can save you from making some very costly mistakes … identify when you’ve missed any key due diligence items … and connect you with valuable resources, you wouldn’t otherwise had access to.

Every Commercial Property has a Lifespan.

As an investor, one of the biggest errors you can make is to ignore what you will need to spend on the upkeep and renovation of the building – if you intend to hold it for any length of time.

The building may need upgrading – with a new roof, or the electrical system. Every building goes through these renewal phases.

Therefore, make sure you have a long-term strategy to handle such repairs.

Focus on ONE commercial property sector at a time.

Especially when you’re starting out, you should focus on one area of investment: offices, shops or warehouses – whichever you prefer. Each deal needs your undivided attention.

It’s much better to master one sector or location, than to be an average player over many.

Ensure you have Adequately Protection.

As with anything in life, messy lawsuits will occasionally occur. Therefore, you need to do everything in your power to protect yourself and your investments. Ask yourself the following questions, to determine whether you’re fully covered:

  • How is your commercial property protected – both legally and insurance-wise?
  • Are your other investments totally separated from each other … so that one lawsuit cannot impact upon any the other investments?
  • What do you have at stake, if you lose a lawsuit? Is your personal property, for example, your home … fully isolated?

Don’t try to guess when it comes to answering these questions. Talk to a lawyer to ensure you are fully protected … if you were ever to be sued.

ALSO … for a partnership or syndicate, make sure you finance the deal using non-recourse borrowings.

Non-recourse means you aren’t required to personally guarantee the loan.

This gives you two distinct advantages: it allows you to be removed from the loan if the partnership turns sour. And, if the property were to fail, the financier cannot come after you personally.

Once you understand the “Rules of the Game”, buying commercial property is really quite straightforward. Of course, you need to do some homework and make sure you get the right advice along the way. But really, it’s not all that complicated.

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