Guidelines to Successful CRE Investing
When it comes to commercial real estate (CRE) investing, there are loads of different strategies and approaches out there, including (and we're not kidding) some based on tactics learned in Monopoly! A recent article in National Real Estate Investor we came across asserts that there are two main factors that will determine your CRE investment success. These elements of an investment may be simple and seem like common sense, but ignore them at your peril!
The first recommendation was to invest with successful and experienced people. It seems not only logical but that it should go without saying – of course you'd want to invest with successful people! Appearances aren't everything and you'll need to do some work vetting your partners. In vetting these people, you'll need to see what those successes actually look like. Have they only done well in a certain market and what have they learned from past failure? Finding strong success across the board along with trustworthy recommendations will go a long way toward earning your approval.
Throughout the process of assessing your investment partner/s, you'll need to ascertain if they pass the “gut-level” test; that is, what does your intuition tell you? Some people will immediately strike you as on the level and some may set off alarm bells – so pay attention to what your gut reaction is when you're talking with potential partners. Another great tip is to become comfortable taking notes; jot down information you want to verify later and be sure to request a resume and history for anyone who'll be on your team. Later, you can comb through your notes and fact-check what you heard. You should also verify the skill set and specialization of team members: who has worked in what part of this industry? Pay attention to detail as well as your own innate sense of character judgment when choosing investment team partners.
The second factor that can help shape your success is to perform total due diligence...before making any important investment decisions. You'll want to vet everyone on your investment team, and assess their capabilities, history, experience, etc. Then look through the nuts and bolts of the investment itself; that is, after analyzing the financial projection is the risk worth the reward? If you're not the expert on this project, be sure you consult with someone who is an independent expert. Once you're sure that you've completed thorough and exhaustive background work on your investment team and investment, trust your judgment. Even once the ink is dry on the deal and your funds are involved, be sure to conduct periodic monitoring of your investment to protect the success of the project for everyone involved.
Although these points may seem intuitive, by not choosing the right partners or properly vetting investment team members, or by skimping on the homework behind the investment you can risk setting yourself up for failure. With such large stakes, it's important to take precautions to ensure you put together the right investment team and the right investment – and create the best possible chances of a prosperous return. By spending more time vetting potential partners and digging into the investment deal before signing on the dotted line, you'll also spend more time enjoying the fruits of your labor: a successful investment.