Be a Wise Commercial Investor: 4 Tips You Should Be Doing
Commercial real estate owners and investors are optimistic about the current market conditions, however it wasn’t that long ago that many of us faced a massive impact by the recession that struck the U.S. economy ten years ago. Real estate is cyclical, and while it is impossible to predict future real estate gains or losses, it is always a good idea to plan ahead and be a wise commercial real estate investor. Here are four tips you should keep in mind as a commercial real estate investor, no matter how strong the economy.
- Cash reserves: a lack of cash reserves is arguably the biggest mistake that commercial investors make. Start building your emergency fund now, before there is an emergency. You can do this by forgoing owner distributions; its still your money just keep it in an operating account instead of paying yourself. Take a hard look at your books, and ask important questions such as, do I have enough cash reserves for tenant improvements, commissions, or a point where you may have negative cash flow? If not, starting building your cash reserves now.
- Make your building upgrades now: if you have been putting off your commercial building upgrades, it is a wise idea to get them done. Not only for preventative maintenance but get them done while you have the cash flow to pay for them.
- Review your loan terms: During the Great Recession, many commercial investors lost their properties, because they were not able to refinance their building loan. If your loan is coming due in the next few years, you want to review your terms and many modifications, that are in your best financial interest – you may be able to save money on a lower interest rate or extend your term to give you some room to breathe.
- Do you know your breakeven point? Knowing your numbers is crucial. Do you know what your breakeven point is? Study your finances and analysis your current rent roles and vacancy rates to protect your breakeven point.
For more than forty years, Knipp Contracting has been helping investors like you maximize their property values. Whether you are looking to renovate your existing commercial building or break ground on a brand new commercial real estate project, our team of experienced experts are ready to help you with all your construction and real estate development needs. Our experienced team members are standing by, ready to assist you today. We look forward to hearing from you soon!