For investors looking for a reliable method of investment, there is perhaps no better option than commercial real estate. But with so many building their wealth through these property investments, there has to be a way to gain an edge.
Start by asking the fundamental questions that any investor should be asking before getting into commercial property. Here are just a few of those fundamental questions.
Cash Flow or Appreciation
The most critical question to ask is what way the property can be a success. There are two approaches: immediate cash flow and a long-term investment that appreciates over time. It is crucial to know your approach here.
There are definite pros and cons to each type and it depends on your own personal investment portfolio. While there is no guarantee of appreciation, commercial property has a strong tendency to become more valuable over time. But there is nothing like the potential for cash flow now.
What is Your Risk Tolerance?
Any investor should have an idea of what level of risk they are willing to take on. While most commercial real estate is as reliable as it gets, there are still inherent risks to the entire endeavor. Knowing those risks and how they compare to the level of risk you will take is imperative.
For instance, if the market takes a dive, are you able to remain afloat financially while the market swings back around? These are important things to know before getting involved in a piece of commercial real estate.
Is Liquidity Required?
The downside to real estate is that it is one of the least liquid investments out there. Which means that it is difficult to get out in short order, especially if you want to get your money back. If having money tied up for years is a concern, then finding something more liquid may be a better alternative to real estate. Stocks are generally much more liquid, providing the opportunity for cash right now.