Some of the factors that prove commercial income and investment properties don’t always fit the same for one investor versus another one. Some are mentioned below.
Age and time are significant reasons investors purchase different properties.
Risk /reward tolerance to a return is crucial in respect to gambling for higher returns or very conservative in protecting your principal or equity placed into the investment.
Are you looking for a short or long term strategy, such as quicker short term profits or steady long term income with a smaller chance of appreciation?
What about tax write-offs? Would you prefer a 1031 exchange to delay capital gains tax, or pay a tax on a short term profit and go to next deal.
Would you rather have all cash for a deal, or leverage with lower interest rates and purchase a larger deal than your cash position alone would allow? Beware of loans that most likely will come due before the lease expires, putting you at risk for either refinance or sell or come up with cash to payoff the loan balance.
Multi tenant properties or single triple net properties are easier to own: no expenses and no management to speak of win hands-down in the mind of many investors.
The various assets groups such as retail, assisted-living, apartments, warehouse and office all have different risk factors and provide different safety features for different investors.
Going at it alone, under your sole ownership and guidance, versus taking a part interest with top professionals in each field is another factor to consider. The management, leasing and fix up of property will perhaps determine which direction is best for you?
When borrowing against the property, does interest-only or amortization of the loan appeal to your final goals?
Keep in mind, your payments on interest-only or less then your cash flow is more but you’re not building up any equity in the property, so when you go to sell you haven’t paid down any of the principal thus you’re at risk if the property has not increased in value. In addition, rents may go up by 2% or 3% a year but so do expenses and could just offset each other.
For further details and commercial real estate guidance call or write Jeff Gitt, 314-757-1031 firstname.lastname@example.org.