Common Mistakes Made in Commercial Real Estate Investing

Common Mistakes Made in Commercial Real Estate Investing

The commercial real estate industry is a lucrative investment option that is highly dynamic that can easily propel an aspiring investor to success. Much due diligence before investing in commercial real estate is necessary. Among the areas that an aspiring entrepreneur should focus on before establishing a business include understanding the common mistakes that are often committed when investing in commercial real estate.

Inaccurate property valuation

In the commercial real estate industry, property valuation is a crucial entity that should be mastered with great precision and accuracy. Sometimes, aspiring real estate investors make the mistake of underestimating or overestimating the net worth of a property. Failure to accurately consider all the variances that determine a property’s net worth in a market makes such an investor to invest more than necessary. Generating a profit from such investment becomes an uphill task.

Inaccurate sources of information

Investors In the real estate industry should rely on a great wealth of accurate and reliable sources of information when making decisions. Quite often, ambitious real estate investors fail to exercise the necessary due diligence when sourcing information to advise their decisions. Focusing on opinionated publications and failing to benchmark information may lead to wrong and costly decisions.

Taking too much risk

Risk-taking in the real estate industry is considered as a norm. As an investor, it is important to consider weighing each risk to ensure that it is manageable. Some of the common risks that investors have to bear include taking loans to finance investments such as property acquisitions. As part of the due diligence, the investor should consider aspects such as loan-to-value and the debt coverage ratio to ensure that they are within manageable limits.

Improper timing of decisions

Decision making in real estate investments should be precise and well researched. As an ambitious investor, it is quite common to make rushed decisions, such as acquiring large properties at times when the market is not favorable. Poor timing may cost the investor capital as they will have to wait for the market to stabilize before making sales and profits.

Choosing the wrong market

The choice of investing in the real estate industry should be precise and well-researched. Sometimes, investors fail to consider the numerous factors at play when choosing the right market and location to base their operations in. Poor choices, in this regard, may stagnate the business at a later stage as moving products in the market will be substantially tough.

Follow These Rules When Investing In Overseas Real Estate

Follow These Rules When Investing In Overseas Real Estate

Why Invest In Overseas Real Estate?

Overseas real estate investments can provide you with additional opportunities besides the ones in your home country. They can also offer handsome returns and let you diversify your investment portfolio. As with all investments, foreign real estate investment does have its risks. You can minimize these risks by following the following rules.

The Rules to Follow when Investing in Overseas Real Estate

One can be overwhelmed quite easily by a foreign culture. Don’t get culture shock by studying the place you want to invest in ahead of time. Find out about the local culture, the way business is done, and the lifestyle of the area you want to invest in. This will help you make a smarter and less risky investment.

The laws of the foreign country you want to invest in may differ from the laws of your home country. Make sure you know what the rules for foreign investment in property are. You should also make sure that you follow all the rules and regulations in that country. Otherwise, you may find yourself facing legal battles or lose your investment altogether.

Foreign investments may be extremely attractive to investors. That attraction may come with considerable risk. High returns usually entail high risk, so you don’t want to invest all of your money into foreign real estate. It is wise to start small at first and then increase investments if they are successful.

A certain area may look extremely appealing to you as an investor. You may want to invest only in that area. This will leave you vulnerable to a downturn or disaster in that area. You don’t want to concentrate all of your investments into one location or basket. Spread the foreign real estate investment around to minimize risk.

Financing for an overseas real estate investment can get complicated. It can also get expensive. Be sure to look at all your options. The best way to avoid expensive financing and loads of paperwork is to pay with cash.

Finally, you should not attempt the investment alone. Enlist the help of local experts and professionals such as accountants, real estate agents, and attorneys. They can help you locate the ideal foreign real estate investment for you. Be sure you consider liquidity needs as well and the tax impact the investment will have. Taking this into consideration can help you pay fewer taxes and have more cash readily at hand when needed.

How Climate Change Can Affect Real Estate Investment

How Climate Change Can Affect Real Estate Investment

Climate change is a huge concern in our time. It has become such an evident issue that even governments and other stakeholders across the globe boost their concerted efforts of responsible use of the environment. Effects of climate change, such as adverse and rare, weather elements, flooding, hurricanes, extremely high and low temperatures, among others are already having a major impact on various industries including real estate. Here is an overview, according to experts, on how climate change is, directly and indirectly, affecting real estate.

  • Accumulating losses of real estate property

Adverse weather conditions, especially extremely high precipitation and hurricanes, have a huge impact on the structural integrity of real estate properties. Buildings in the path of major hurricanes in the United States suffer partial or total destruction. In the state of California alone, for instance, rising sea levels, extreme weather elements, coastal erosion, extreme floods, and wildfires cause an average of $3.9 billion worth of damage annually.

  • Reduced property demand in some areas

Properties located in states that experience extreme weather elements, especially hurricanes and high rainfall, have been determined to suffer low demand. This is even as anticipating property owners shy of purchasing properties from those areas for fear of suffering losses. States such as those located along the East Coast, including Florida, are particularly affected by annual hurricanes.

The reduced property demand in some areas is accompanied by hiked prices of properties located in states where the weather is favorable. This is because more anticipating homeowners choose to purchase property in those areas, thereby leading to increased demand.

In addition, real estate engineers are expected to up their game as far as design and construction of homes and properties are concerned. Buildings are expected to be constructed with reinforcements in order to withstand the extreme forces of weather such as hurricanes.

  • Increased property insurance

Property insurance companies have also been largely affected by extreme weather conditions brought by climate change. The increased risk of homes being exposed to adverse weather conditions and thereby suffering destruction has led to insurance companies to rethink the factors to consider in risk calculation. The cost of insuring a property located in an area that is highly prone to adverse climate change is exponentially high. Homeowners are there for paying the cost to secure homes in such areas.

Losing real estate property, reducing the demand, and increased property insurance are only a few effects of climate change. As the situation worsens as will the real estate industry.

Types of Real Estate Investment Loans

Types of Real Estate Investment Loans

Real estate investment is among the most successful field of investment in the world today. The investment is projected no to go down anytime soon as investors are flooding in each day. Just like any other form of investment, an investor needs to have some financial zeal to engage in this business. But most investors don’t always have bundles of cash on hand. Most of the top real estate investors borrow money from real estate fund lenders. Below are some of the most popular lenders for real estate credit and investment property loan lenders.

1. Hard money lenders

For many years now, Hard Money lending has been a crucial resource for almost all types of investments. It involves offering funds in the form of short-term credits of between 6 to 60 months. Hard Money may charge high interests and in most cases, may not have forestallment penalties. Traditionally, Hard Money lenders have been processing funding very fast and few requirements.

2. Transitional Funding

Transitional Funding is arguably the easiest and speediest lending method for most investors in real estate assets, especially in house flips and wholesale deals. More so, this type of lending is among the least popular forms of real asset financing. Transitional Funding works best for the investors who wish to be in, on, out and receive their real estate payments quickly. The terms of this funding method are too good that some people think it is a scam until when it works for them. Transitional Funding is solely for investors who do wholesale real estate deals. In Transitional Funding, an investor gets 100% funding, and their creditworthiness, income proof, and assets do not have to be checked. Besides, these types of lenders do not have to require the production of full title reports, appraisals, or insurance.

3. Private Lending

As the name suggests, Private Money Lenders are people with money and wish to loan it on real estate. These individuals consist of all kind of people with savings and investment or surplus cash intending to receive passive income. Private Money lenders are flexible and allow investors to negotiate their terms of lending. Their terms vary from one investor to another. The popularity of Private Lending has marked a significant rise due to more awareness of the opportunities they provide.

Hard money lenders, transitional funding, and private lending are all great ways that real estate investors can receive a loan and not miss out on a potential real estate investment.

Helpful Tips for People New to Property Renovation

If you’re a first-time homeowner new to property renovation, the idea of fixing up your outdated home is probably extremely intimidating. The professionals on all of those home improvement shows make the demolition and renovation process look so quick, easy, and painless, but you’re smart enough to know it isn’t that simple. For those who are unsure of how to start their first property renovation, this article will give you a few tips on how you can make your home remodel simpler, cheaper, and less stressful.

 

Get to Know Your Builder

If you’ve never renovated a home before, it’s best to sit down with a builder or an architect to better flesh out how you want your home to look. Additionally, are you planning on flipping this home in the near future, or do you want to settle down in this house and raise a family? Your builder will bring his or her experience to your project, and help you find ways to renovate your home so that it suits your needs.

 

Your builder will also help you plan ahead and keep your family and pets safe during your first home rebuild. For example, if you’re re-doing your home’s plumbing and need to shut the water off for an afternoon, your builder will notify you well in advance so that you can make the appropriate arrangements.

 

Stick to Your Budget

 

Creating and maintaining a budget is the most effective way to ensure that your home renovation will actually add value to your life, instead of leaving you in financial ruin with a partially remodeled property.

 

One rule of thumb to keep in mind is that your home renovation will always be more expensive than you anticipate. Experts suggest that you should save at least 20% more than your projected budget to cover unanticipated emergencies or hidden costs.

 

Think About Comfort

 

One thing first-time renovators often overlook is the idea of comfort during their rebuild. A good question to always ask yourself is, “How can I make my home more comfortable?”

 

Comfort doesn’t always have to be about adding high-end appliances or fixtures in your home. Instead, comfort can be as simple as making sure you have enough electrical outlets in your living room, or that you’ve got the right lighting in your kitchen for meal-time socializing. As you progress in your first property renovation, always be thinking about adding comfort to your new space.