What You Should Know Before Investing in CRE

What You Should Know Before Investing in CRE

CRE investing can be a smart addition to any investor’s asset portfolio, it has proven to be broadly successful. A CRE investment generates cash flow and creates income on the monthly rental payments. CRE generates future asset value appreciation. Commercial real estate is a long-term investment compared to for, example, residential real estate. CRE leases generate a steady stream of income for the property owner over a long time. A CRE investment is purchased with leverage. Typically, a payment of 20-30 percent is paid by the investors with the balance coming from other lending sources, including bank loans. Since a CRE investment is a tangible asset, it is typically a stable asset in an otherwise fluctuating investing marketplace. Lastly, there are significant tax benefits for owning and investing in commercial real estate. 

What You Should Know Before Investing in CRE 

There are some things that you should know and do to achieve CRE investment success and to avoid significant problems: 

First, understand that all property types are different. CRE encompasses office, industrial, retail, multifamily, self-storage, medical, elder care, hotel, special purpose, and land. Each of these classes offers different returns. Select properties strategically rather than purely opportunistically. 

Second, understand that market supply and demand factors will influence property returns. Every market is different. 

Third, know that there are market cycles that influence the profitability of commercial real estate investments.  

Fourth, it is critical to do due diligence on every CRE investment. Know that every investment should be fully investigated, analyzed, and inspected before a purchase decision is reached. Evaluations need to consider zoning to allow the intended use, permitting requirements and costs, and what a market will support. 

Fifth, develop a financial contingency plan and a capital reserve. There may be uncertainties and unanticipated costs. 

Sixth, anticipate some extended timelines and the possibility of some setbacks. 

Seek Experienced Financial Assistance 

Contact TCF Capital for a wide range of financing solutions, tailored to your needs to help your investment dreams come to life.