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The basics of commercial real estate investing: risk and return

Written on November 9, 2011 by George Geoghegan

Whether you are a beginner in investing or a seasoned pro, you are no doubt aware that there are many types of commercial properties in which to invest, as well as a different number of ways to invest. Attractive commercial real estate investment opportunities are everywhere what should you be focusing on when evaluating one of these deals?

Today, REDEV presents the first of a four-part weblog series on the basics of commercial real estate investing. Well discuss the considerations you should keep in mind when preparing to make an investment, whether it is your first or one of many.

Risk and return

The promise of high returns is what lures us to investing, isnt it?

We are all aware that no investment comes without risk. You can, however, minimize your risks by making smart investments. Elevated risk comes in when you are trying to tackle a commercial property on your own you may over-leverage your investment, returns are probably not already proven, and you likely dont have the expertise to truly understand the many facets of an investment deal. Fortunately, partnering with an established and experienced commercial realty firm can help to ease the burden and lower your risk considerably.

We suggest that you look for opportunities on properties that are already producing returns from day one. Unfortunately, you cant always take a sellers word when discussing income, particularly as it relates to returns on investment. Proper due diligence is done before acquiring or investing in a property can insulate you from this risk. Income should be verified with tenants, and a paper trail should be established to avoid disappointment later.

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