The pandemic has affected every market significantly. During the beginning of the pandemic, the commercial property values saw a drop in value due to the weakening economy. However, when investing in commercial property, you know you are here for the long-haul. Long term commercial real estate investors can weather the storm better than others. And such instances also open up opportunities for people to sift through the carnage and acquire a once-in-a-lifetime bargain.
When it comes to investing in commercial property halfway through 2020, there are certain things you should keep in mind. When you are in the driving seat of your investment, you should be prepared to face the worst! That investment perspective should depend on:
- Significant importance to the location
When it comes to investing in commercial property, location really does matter. For example, in the office space market, it feels safe to target a highly-competitive urban market where you can find growth by outperforming your sophisticated and rich rivals. But you can also focus on well-trafficked corridors, which are in the fast-growing lane that has been largely overlooked by your competing investors. This strategy can land you a money-maker.
- A margin of safety:
When investing in commercial real estate – or any real estate for that matter – you make your money go further. You should be looking at acquiring assets at 20% to 60% of their replacement cost. This serves as a hedge against the risks associated with new construction. Also, buying a quality property at discounted rates allows you to beat overburdened competitors on rental rates.
- Cash management:
Markets can be unstable, which are pumped by low rates, high borrowing, and an influx of yield-chasing capital. Investments in commercial real estate have always been leveraged as asset play; however, it is necessary to have sufficient reserves and working capital to meet any demands that arise inadvertently. Cash is king during normal times. However, during distress, cash, and cash flow are considered to have a higher power.
You might believe that investing in a premium-priced property with cash-rich tenants from top industries will be a dream come true for a commercial real estate investor. However, the real upside can be found by buying a quality property in the rough and proceeding to add value to it that acts as a multiplier effect. This also means targeting tenants of investment-grade who are here for the long-term, agreeing to lease that reflects your investment path.
Commercial real estate investors can leverage opportunities by buying quality assets that are well-situated from distressed sellers and transforming them to accommodate a more technologically distributed way to conduct business. Disruptions are bound to bring opportunities; it’s just a matter of preparedness. To find amazing commercial properties to invest in, consult with us at Perfect Real Estate Investments, and we can help you find the best deals in the market. Call us today for investing in commercial property.