Investment Advisory Services
MAIN is prepared to provide clients with a financial, market feasibility study of how a real estate investment is likely to perform and how suitable it is for a given investor. Investment analysis is the key to any sound portfolio-management strategy. Investment analysis is a look back at previous investment decisions and the thought process of making the investment decision. Key factors should include:
One of the principal Owners of MAIN is a Certified Commercial Investment Member (CCIM). MAIN approaches Investment Advisory Services from its professional Investment experiences gained and practiced by CCIMs over the last 50 years; and, through the implementation of CCIM resources, including CCIM's ongoing practical educational meetings and courses over the last 10 years. MAIN approaches all Investment Analysis using the CCIM's Interest Based Interest and Decision Model. Sometimes referred to as a principled negotiation, collaborative negotiation, or win-win negotiation in the context of commercial real estate, the interest-based analysis includes the following aspects:
- People make decisions based on their interests (or needs).
- The key to successful analysis is finding creative and effective ways to satisfy the interest of all.
- Understand how a proposed analysis will satisfy or harm the criteria of interest.
This approach of interest-based analysis becomes more important than the financial
This approach of interest-based analysis becomes more important than the financial conclusions derived directly from the Property.
MAIN Also Offers a Full Range of Real Estate Consulting and Advisory Services Necessary to Assist Our Clients in:
Things to Consider
Real estate has produced many of the world's wealthiest people, so there are plenty of reasons to think that real Property is a sound investment. Historically, real estate appreciation plus rental income has underperformed stock appreciation plus dividend income. What gives real estate an advantage is the ability to benefit from the leverage of purchasing it with borrowed money at relatively low-interest rates and the compounding effect. The Investment in real estate is a decision to invest funds for a long period of time. Usually, investments in real estate are held for a minimum of 5 years, usually in the range of 10 to 15 years. Learning the basics of how to invest in real estate is the first step in choosing an investment strategy. You can then explore different real estate investment strategies and pick one based on your time, budget, and long-term goals. There is no optimal time to invest in real estate since the financial environment, such as the cost of funds, interest rates, loan terms, and conditions, are always changing. Investors should make an investment in real estate at any time that the Investor has a broad understanding of the market, and you have sufficient budgeted funds for such a Purchase. The financial parameters of the Investment must make economic sense to you, or you do not invest. Investment in real estate is evaluated project-by-project when it makes economic and financial sense. It is always a good idea to select a professional commercial broker to advise you on the Purchase and an established commercial property manager to manage the Property.
WHEN TO PURCHASE?
Before buying your investment property, determine what your goal is for this Investment and stick to that plan, regardless of where the market goes in the future. Whatever your goal is for your investment property, it's important to remember that real estate is not a liquid asset. Always consider the worst-case scenario of not being able to sell your Property for the price you want. Some properties lose value, and some double or triple their value. The Investor should obtain expert advice from a property management company, real estate consultant, or accountant to add insight into helping you decide to hold or to sell. There are times when it is financially right to move on to a new property. Real estate investment properties are a constant learning experience for the Investor, and what you learn from one Property can help you find success in another.
When Should you Sell or Hold?
Your Property's appeal dictates the amount of rent you can expect, so you want to optimize your property marketability to maximize the return. You know you need to upgrade some of the elements of the Property, but which upgrades make the most sense? Should you paint the exterior? Should you replace the carpeting with hardwood or tile? What about granite countertops, upgraded cabinetry, or should provide modern lighting? Keep in mind that when you own an investment property, upgrades may be tax-deductible (consult your Certified Public Accountant). Whether you've just purchased your first rental Property or you're upgrading an old unit before a new tenant moves in, here are the five things you should replace or update:
Make sure the security lighting is working properly.
Keep smoke alarms, Co2 detectors, and fire extinguishers up to code.
Invest in safer electric outlets.
Upgrade the toilet to save your water bill
Change the locks with each tenant.
It can be tempting to just rent an apartment as is, especially if you only recently purchased the Property. It can cost a lot of money to make renovations! However, if you want to keep your best tenants or attract new ones when a unit is available, you need to have a good reputation for keeping your rental properties in tip-top shape. Also, while you may expect your tenants to take care of certain details themselves, like replacing the bulbs and smoke alarm batteries, offering to handle these simple upgrades will also give you an opportunity to enter a unit and see how the tenant is maintaining it themselves. MAIN has the expertise to guide you through upgrades and corresponding rental increases you could enjoy as a result. Let MAIN's more than 35 years of experience assist you in your next upgrade.
WHEN TO UPGRADE?
- Residential real estate investments are properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the Property. The length of their stay is based upon the rental Agreement, or the Agreement they sign with you, known as the lease agreement. Most residential leases are on a twelve-month basis in the United States.
- Commercial real estate investments consist mostly of things like office buildings. If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you rent to use the Property. It isn't unusual for commercial real estate to involve multi-year leases. This can lead to greater stability in cash flow and even protect the Owner when rental rates decline, but if the market heats up and rental rates increase substantially over a short period of time, it may not be possible to participate as the office building is locked into the old agreements.
- Industrial real estate investments can consist of everything from industrial warehouses leased to firms as distribution centers over long-term agreements to storage units, car washes, and other special purposes real estate that generates sales from customers who temporarily use the facility. Industrial real estate investments often have significant fee and service revenue streams, such as adding coin-operated vacuum cleaners at a car wash to increase the return on Investment for the Owner.
- Retail real estate investments consist of shopping malls, strip malls, and other retail storefronts. In some cases, the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentivize them to keep the Property in top-notch condition.
- Mixed-use real estate investments are those that combine any of the above categories into a single project. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.
Each type of Investment has an associated Risk/Benefit tolerance level. The assessment of risk is measured by the initial annual CAP rate, Return on Investment (ROI) and production of income of the investment holding period measured by the measurement of Internal Rate of Return (IRR). Each Investor must decide on their tolerance to risk - the loss of/on an Investment. Assessments based only on CAP rates the minimum risk to the higher risks investments in 2018 are as follows:
- Residential real estate investments
- Industrial real estate investments
- Commercial real estate investments
- Mixed-use real estate investments
- Retail real estate investments
Each Investor should seek the counsel of a professional commercial investment broker or property manager such as MAIN to determine the Investor's tolerance to risk and long-term goals before investing in real estate.