INVESTING IN A REAL ESTATE, WHAT IS YOUR STRATEGY?

We ask this question from all our real estate investment clients. And yes, I mean ‘clients’. To us, real estate is not a transactional business but more of an advisory business. We consult with our clients what their goals are and what they hope to achieve, and present them with options that meet their specific requirements. To begin with, real estate is the only type of investment that we can use leverage as a growth instrument. You can leverage stock through options, however, that is perilous and you might lose all your money. In order to purchase stocks or bonds, you need to put up all the money up front and your liquidity is the limit of your purchase. Real estate is unlike any other investment. As a long-term growth investment, real estate is the only asset class that allows you to use leverage to purchase more than your liquidity. And yes, like any other investment, there will be a direct correlation between risk and reward, albeit real estate is considered less risky and volatile.

For this article, we will exclude single-family homes used as a primary residence and not purchased as an investment. Single-family homes also appreciate in value, as commercial real estate does. But as investment strategies are concerned, real estate can run the gamut from multi-family properties to shopping, retail, office, industrial, storage, farms, and to developers, syndicators, passive investors, rehabs, flips, etc. You get the picture. Having such a vast array of options, we can compare it to some more traditional investments, such as stocks and bonds. As with any investment, where you put your money depends on what you want to achieve and your life circumstances. Younger investors might want to get into riskier and more aggressive investments, whereas those whom are retired might want to get into safer and more predictable investments.

For current property owners, the government has blessed us with the ultimate tax-deferred growth weapon.  We can use 1031 Exchanges as a huge strategy driver. 1031’s are the jumping board from one investment to another, using all the appreciation of the original property. Where you jump to and what you want to achieve from that jump is ultimately the choice that you have to make. So before we make any recommendations about any type of real-estate related decisions, we first ask our clients to ask themselves these questions:

What is the purpose of this investment? Immediate cash flow? Long-term appreciation? Asset preservation?

Do you want to use leverage? How much? What amount I still consider a safe leverage amount given your risk tolerance?

How do you want it managed? Self-managed or professionally managed?

What is your exit strategy? How long? Left in Trust?

Do you have any other income? Are you depending on some or all the income of the property to live?

What sets us apart–We ask the questions to determine the best options for a strategy driven investment.

We are in the people's business, sharing our decades of experience and accumulated knowledge to better serve our clients.

Experience the difference! Call us at 310-943-8530 or email us at info@cbicommercial.com