Five Tips for Minimizing Risk in Commercial Real Estate Investing
[caption id="attachment_1336" align="alignright" width="300"] Photo credit: Phil Essing[/caption]
The Canadian commercial property market may be in great shape, but a recent fraud scandal involving a Calgary investment advisor raises concerns for investors.
Here are five factors to evaluate before investing:
1. Property investment advisors
Property investment advisors with adequate local expertise can provide and suggest industry information and forecasts, as well as hidden gems specific to the local area. The company's history, financial strengths and weaknesses and motivations in making their decisions and recommendations can provide ample information if they're compatible with you.
In real estate, location takes centre stage. But many of the prime real estates are often expensive or taken. Instead, focus on how the area will look in the future. If the area is forecasted to be up-and-coming or its neighbouring area is undergoing mass redevelopment, it might be a location worth investigating more into.
Diversity in various tenant sizes and recognition is favourable. Along with capturing multiple consumer markets, having nationally recognized names, mixed with boutique businesses can add interest and bring financial advantages.
Furthermore, diversity in investing partners can prove to be more manageable and beneficial. Having multiple, smaller project partners releases the pressure and responsibility of taking the load alone.
4. Individual investment
While location, property type and industry forecasts are substantial benefactors for great investments, the importance of individual investment opportunities should not be undermined. In particular, investors should determine the quality of the property and analyze whether there are significant value-add opportunities.
5. Property management
Lastly, having suitable property supervision ensures daily activities are efficient and managed. Research who will be managing the property on a daily basis and understand their values and strategies for maximizing performance. If it doesn't complement your views, it can result in a tense relationship.
There are always risks when investing, but being aware of these risks and how to minimize them can help make these important decisions more manageable.
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