MAIN is prepared to provide clients the financial, market feasibility study of how a real estate investment is likely to perform and how suitable it is for a given investor. Investment analysis is the key to any sound portfolio-management strategy. An investment analysis is a look back at previous investment decisions and the thought process of making the investment decision. Key factors should include:
One of the principal Owners of MAIN is a Certified Commercial Investment Member (CCIM). MAIN approaches Investment Advisory Services from its professional Investment experiences gain and practiced by CCIMs over last 50 years; and, through the implementation of CCIM resources including CCIM’s ongoing practical educational meeting and courses over the last 10 years. MAIN approaches all Investment Analysis using the CCIM’s Interest Based Interest and Decision Model. Sometimes referred to as a principled negotiation, collaborative negotiation, win-win negotiation, in the context of commercial real estate, interest-based analysis includes the following aspects:
This approach of interest-based analysis becomes more important than the financial conclusions derived directly from the property.
Your property’s appeal dictates the amount of rent you can expect, so you want to optimize your property marketability to maximize the return. You know you need to upgrade some of the elements of the property, but which upgrades make the most sense? Should you paint the exterior? Should you replace the carpeting with hardwood or tile? What about granite countertops, upgraded cabinetry, or should provide modern lighting? Keep in mind that when you own an investment property, upgrades may be tax deductible (consult your Certified Public Accountant). Whether you’ve just purchased your first rental property or you’re upgrading an old unit before a new tenant moves in, here are the five things you should replace or update:
It can be tempting to just rent an apartment as is, especially if you only recently purchased the property. It can cost a lot of money to make renovations! However, if you want to keep your best tenants or attract new ones when a unit is available, you need to have a good reputation for keeping your rental properties in tip-top shape. Also, while you may expect your tenants to take care of certain details themselves, like replacing the bulbs and smoke alarm batteries, offering to handle these simple upgrades will also give you an opportunity to enter a unit and see how the tenant is maintaining it themselves. MAIN has the expertise to guide you through upgrades and corresponding rental increases you could enjoy as a result. Let MAIN’s more than 35 years of experience assist you in your next upgrade.
The Investor needs to find the type of real estate property that appeals to their personality and financial resources. Investment real estate can be divided into following categories:
Residential real estate investments are properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the property. The length of their stay is based upon the rental agreement, or the agreement they sign with you, known as the lease agreement. Most residential leases are on a twelve-month basis in the United States.
Commercial real estate investments consist mostly of things like office buildings. If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you rent to use the property. It isn't unusual for commercial real estate to involve multi-year leases. This can lead to greater stability in cash flow, and even protect the owner when rental rates decline, but if the market heats up and rental rates increase substantially over a short period of time, it may not be possible to participate as the office building is locked into the old agreements.
Industrial real estate investments can consist of everything from industrial warehouses leased to firms as distribution centers over long-term agreements to storage units, car washes and other special purposes real estate that generates sales from customers who temporarily use the facility. Industrial real estate investments often have significant fee and service revenue streams, such as adding coin-operated vacuum cleaners at a car wash, to increase the return on investment for the owner.
Retail real estate investments consist of shopping malls, strip malls, and other retail storefronts. In some cases, the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentivize them to keep the property in top-notch condition.
Mixed-use real estate investments are those that combine any of the above categories into a single project. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.
Each type of Investment has an associated Risk/Benefit tolerance level. The assessment of risk is measured by the initial annual CAP rate, Return on Investment (ROI) and production of income of the investment holding period measured by the measurement of Internal Rate of Return (IRR). Each Investor must decide on its tolerance to risk - the loss of / on an Investment. Assessments based only on CAP rates the minimum risk to the higher risks investments in 2018 are as follows:
Each Investor should seek the counsel of a professional commercial investment broker or property manager such as MAIN to determine the Investor’s tolerance to risk and its long-term goals before investing in real estate.