Diversifying your investments in commercial real estate
We all have heard the phrase, “don’t put all of your eggs in one basket.” Concentrating all efforts onto one type of investment is very risky and not advisable for the long term.
We know we should diversify, but how?
According to Chuck Heller, with Landmark Commercial Realty Inc., there isn’t a one size fits all approach, but there is a recommended strategy.
“Real estate is cyclical so diversifying your investments makes sense,” Heller adds. “When one asset is down, others might be up, and you can ride the waves of demand in the market cycles.
The creation of a profitable investment portfolio, Heller believes, should be formed around the answers to these two simple questions:
- How active do you want to be?
- What are your investment goals?
He says that multi-family property investments are very hands-on but are also stable and offer investors the opportunity to generate income from one investment.
“Then there is office or warehouse properties,” Heller notes. “While these properties typically involve less of your time, you are dealing with more vacancies.”
He does suggest triple net leases as a great investment for those in the market to be very hands-off. “Triple net leases or NNN lease investments involve very little responsibility, but your investment return is much lower.”
While time and investment goals are the main focus when it comes to what types of commercial properties to select when investing, Heller also suggests a few tips that may help along the way:
Get your finances in order
Heller says getting your finances in order should be done before considering investing in commercial real estate. “Good finances are the foundation of a great investment strategy,” he notes. “Once they are in order, then you can proceed.”
No matter what specific location you decide to spread out your investments, Heller recommends doing a great deal of research to understand the market. He believes you can never have too much information in your back pocket.
Seek help from professionals
“When you have questions, which you will contact a commercial realtor,” he adds. “We know the market and we know the region as we do this for a living. We can guide you to make the best decisions.”
Heller concludes, “Many people want to diversify their investments with commercial real estate, but never do. Don’t be afraid to take the leap, but remember to do your homework first.”