Commercial real estate is indeed nothing less than an institutionalized asset class. The current real estate market scenario differs a lot from before. Over time, strategies of commercial real estate have evolved and increased simultaneously. There are now several ways of investing in commercial real estate in actuality. Also, the various ways to invest are influenced by asset type, property location, strategy, and many other things. Today, people take the help of commercial investment advisors for wealth building strategies in Texas.
In this post, you will come to know about the ideal commercial investment strategies that can help you get a good return on investment.
The Commercial BRRRR
The commercial BRRRR strategy is popular when it comes to evaluating investments. BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. It is a significantly scalable strategy and could be utilized on single-tenant office properties to garden-style apartments with several units.
Buying an undervalued property
This strategy is finding a property that is not valued or appreciated enough. It can be in distressed-seller circumstances but probably requires a noteworthy value addition. It would be best if you were interested in this investment at much lesser replacement costs in such scenarios.
Renovating the building
The next step of the BRRRR strategy is restoring the property. However, the intent of the building’s restoration is not based on comparable trading multiples. The renovation target should be based on increasing the recognized value to tenants. The general renovations for commercial buildings include:
- Updated Flooring
- New Signage & Directories
- Interior and Exterior Paint
- New Lighting
Even though you want to renovate above and beyond these points, they will make any building look brand new.
Renting the property to the tenants
After you have finished upgrading the building’s look and feel, it is high to get it leased. However, suppose you have a background in commercial leasing. In that case, it is right to go for lease brokerage or acquire a property management company’s help. The faster you can lease out space, the quicker you can move on to the next step.
Refinance the investment
Now the best part is when you have restored the building and leased it up, it is time to take all your cash out of the investment. Yes, you read it right. When you have done the previous steps correctly, you must refinance it on a cap rate and take the primary investment out of the deal. However, you will still be the property owner and receiving that money.
Repeat the process
Now that you have got your capital back, built up your balance sheet, it is time to repeat the process. Make sure to create that portfolio of commercial real estate.
Overall, it would be wise to get the help of an investment advisor to take the right steps in getting the returns out of your commercial real estate investment.