You have built your Unicorn, scaled it to the moon and now have profits to invest. What do you invest in and why? If you have $500,000 or $500,000,000 you’ll have a different answer to this question. The large majority of investors are looking for properties $1,000,000-$10,000,000 so we’ll focus here.
Property Type: The main food groups for investors are Office, Medical Office, Retail, Apartments, Industrial, Self Storage. Why choose one over the other? Your personal experience in real estate is the start. What are you most familiar with? The amount you have to invest would be next. How much of your return of investment are you comfortable receiving in monthly/annual cash flow versus at the time of sale? How many streams of income are you comfortable with? What is your ability level to manage people, projects, and complexity?
Geography: The large majority of investors want to be able to drive to see their investment within an hour. Do you have a trade area that you are familiar with and want to invest in? Are the suitable investments in that area consistent with your investment criteria? If not, where are you willing to invest and why? Do you have operational capabilities, relationships or resources in any other markets? What does it take to build those? Is it worth it?
Holding Period: How long are you looking to invest your capital? What is the purpose of this investment? What is your ability and desire to continue to invest capital into a property during the holding period? What is the payback period on amortized tenant improvements in relation to your holding period? How can this all be optimized and maximized?
Financing: Are you going to be financing this purchase? What is the lending environment? Do you have a prior bank relationship? What is that banks experience level with your desired investment focus? Have you worked with a loan broker? What do they cost and how do they work? Are your finances organized and have you prepared a loan packet to present to bank’s investment committee that clearly outlines your finances, track record, and proposed investment strategy? What are market interest rates and what index are they tied to? How long is the loan amortized? How long is the fixed interest rate? When does the rate adjust and by what amount? Are their points paid to the load broker or banker? Is their a prepayment penalty or defeasance? How does the lending environment affect your holding period and investment philosophy?
We practice what we preach and you’ll find that most Lee & Associate’s brokers have used their skills to invest alongside clients and on their own behalf. My current investment focus is multi-tenant industrial property. I’ve assembled a list of properties that I would invest my own capital into. Top Properties of the Month.