Strategies to Protect Your Real Estate Investments In A Mature Real Estate Market

Strategies to Protect Your Real Estate Investments In A Mature Real Estate Market

In this uncertain political and economic landscape, many investors are wondering what's next. The real estate market seems to be nearing equilibrium, and at the same time, consumer demand is constantly changing. Innovations in financing and advertising widen the playing field for the average consumer. Real estate is becoming more centered around the customer than ever.

Real estate investors can protect their investments in this mature cycle with realistic and reliable strategies. You'll notice that many of them revolve around networking with qualified people.

 

9 Trusted Real Estate Finance Strategies

1.Leverage your assets carefully.

Because the market has been increasing for some time, it can seem reasonable to expect that it will continue to do so. A property that increased by 5% last year might be more likely to continue to increase. But discipline has never been more important, as the market is beginning to mature (the increase is slowing). You can still leverage your assets profitably without taking on unnecessary debt.

How much is too much leveraging? Overleveraging may mean that you only put down 5-10% on a property which turns out to be more volatile than you expected. Soon you owe more than the property is worth (known as being "underwater.") Investors who have taken a "put as little down as possible" approach are exceptionally vulnerable during a downturn in the market. You may be able to cover expenses with rent payments, but if the downturn continues, rent prices may fall as well. Therefore, it is important to take into account the possibility of a downturn when determining how much to leverage your assets.

2. Ensure that prospective tenants are creditworthy.

Financial uncertainty is not just for real estate investors. Your tenants are facing the same trickle-down effects from shaky international relationships and a slowing economy. However, real estate remains a worthy investment because people still need a place to live and to do business. Ensure that your property is in reliable hands by doing your homework (or outsourcing the homework) before signing a contract. The following are listed by CCIM as important points to check in a credit analysis:

  • A review of financial records. Review tax returns, balance sheets, income statements, and any other financial records that will give landlords insight into the financial strength of the prospective tenant.
  • Payment track record. Does the tenant pay  its bills in full and on time?
  • Rental history. Did the tenant keep its previous leased space clean and neat? Was its last vacated property left in good condition? What is its relationship like with neighboring tenants? Understanding why a prospective tenant is leaving its current location also is essential.
  • Assessment of the industry. What is the current state of its industry? Tenants in industries that are thriving are more likely to be successful than those in industries that are struggling to retain a foothold in the local economy.
  • Tenant attitude. Ask a tenant about its reasons for choosing this property and location.  The tenant's attitude could be a clue about its business acumen and determination to see the business succeed.

3. Establish a great investment strategy.

With all the resources available, no one has to craft an investment strategy in the dark. Take the time to research, plan, and get advice before embarking on new investments. Work with a trusted advisor to think through factors that influence every solid investment strategy:

  • how much you are free to invest,
  • when you would need access to that money later, and
  • how much risk you can handle.

4. Structure the deal the right way in the beginning.

While it's not for the faint of heart, structured finance can open up new possibilities for your corporation. Real estate loans can be configured to reduce risk and maximize return on investment. Working with an investment professional can open up more complex options for financing your investments.

Also discuss with your real estate finance advisors what name, trust, or LLC will best serve your interests. It's usually not a good idea to have your investments in your own name, and various structures can help minimize risk and maximize your income.

5. Great asset management

Asset managers are crucial to help cultivate the market value of your assets and increase returns on your investment. They will help you make important investment decisions that will help to grow your portfolio. Great asset managers have years of experience and have developed extensive expertise so that you don't have to learn the hard way.

  • Proficiency in asset management makes the difference between a mediocre and a stellar performance at both the individual and corporate levels. - InvestingAnswers.com

6. Hiring the right property manager

Finding a quality property manager can be challenging, but it is well worth the search. Property managers need to be trustworthy, wise, and business-savvy. They manage cash flows by collecting rent, paying bills, etc. They oversee building operations such as maintenance and repair. And they work for you as an advertiser, seeking to fill your building to capacity.

7. Hiring a professional real estate attorney

Working with an attorney is a normal aspect of real estate finance. Finding an excellent attorney can be tricky at first. Word-of-mouth is thought to be one of the best ways to find a good attorney, but ask questions to get the most relevant information. Is this reviewer likely to be remunerated (for online reviews especially)? Is the recommendation from the attorney's neighbor based on their enjoyment of the attorney as a person or based on their professional skills?

Consider going through your address book - who among your contacts is likely employing a real estate attorney now? Ask for recommendations, and then conduct a thorough interview before officially hiring them.

8. Protect your investments with great insurance.

Insurance coverage has been designed especially for landlords and for those with multiple properties. Typical homeowner's insurance will not cut it for real estate investors. Landlords are advised to require their tenants to have renters' insurance as well. You may also consider title insurance if you're purchasing an older building.

9. Develop an ongoing partnership with your CRE professionals.

Real estate investing can be a complicated yet lucrative path to navigate. Without a commercial real estate (CRE) professional, you likely will miss opportunities for creative financing solutions and the most profitable markets. Plus, CRE professionals can help you avoid the mistakes that others have already learned from.

Black Collie Capital is a CRE financing company. They offer advisory services to help you decide the wisest strategy for your investments. Their long-developed expertise can enhance your own know-how and give you access to the best industry practices.

Regardless of your starting point, Black Collie Capital can help you move forward. They work with a wide variety of real estate markets, giving you diversified options that build on your strengths and connections while offering new opportunities as well.