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Commercial Real Estate Things Every Investor Should Know

December 20, 2017

So you want to invest? Here's the top 5 things every new investor should know!

 

1. Do you fit into the criteria?

 

If you are an individual or private investor, you must be an Accredited Investor to invest in certain properties. For an individual or married couple, in order to qualify as an accredited investor, you must meet one of the following criteria:

  • Earn an annual income exceeding $200,000 or joint income exceeding $300,000 together with a spouse.

  • Have a net worth exceeding $1 million – excluding one’s primary residence.

  • Be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.

 

2. Know your market.

 

There are plenty of markets to invest in, based on location of the real estate and the asset class. Retail, multi-family, office and industrial asset classes perform differently depending on location, demographics and economic conditions in the market.  Whatever you choose to invest in, be sure you understand your market. 

 

3. Understand the Lingo!

 

Here are just a few of the important terms any investor should recognize!

 

      Net Operating Income

Net operating income (NOI) is a calculation used to analyze real estate investments that generate income. It is property revenues less property expenses, before paying any loan payments or capital expenses. 

 

      Capitalization Rate

The capitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. Divide the purchase price into the Net Operating Income to calculate the cap rate. 

 

      Cash on Cash

The ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage. For example, if you invest $1 million in equity and receive $100,000 annually, you receive a 10% cash on cash return. 

 

4. The Perks

 

Investing is a great way to get ahead of your finances, improves spending habits and even increase your quality of life in the future. Investing can also be easy when done right! 

 

5. Working with our Acquisitions and Asset Management Team Can Save you Time and Money. 

 

Our professionals understand the market and can help new or long-term investors. 

 

 Starboard Realty Advisors, LLC is a team of commercial real estate experts. As a privately held and fully integrated real estate firm, we have more than 35 years of hands-on experience.

 

Resources

 

http://www.nreionline.com/finance-investment/five-trends-affecting-commercial-real-estate-looking-ahead-2017

 

https://www.morganstanley.com/im/publication/insights/investment-insights/ii_commercialrealestateoutlook2017_us.pdf

 

https://www.investopedia.com/articles/mortgages-real-estate/09/tips-commercial-real-estate.asp

 

https://www.reit.com/what-reit

 

https://www.investopedia.com/terms/n/noi.asp

 

https://www.investopedia.com/terms/c/capitalizationrate.asp

 

https://apiexchange.com/what-is-a-1031-exchange/

 

https://www.stocktrader.com/2009/03/10/young-investing-benefits/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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