The Commercial Real Estate (CRE) investment process is a multifaceted procedure unlike any other acquisition, it’s complicated from contract to close. There are many steps in the process from evaluating a broker sales package, to analyzing the market in which the property is located, touring the property, raising the appropriate amount of debt and equity capital, closing the acquisition, and managing and leasing the property.
Time is always of the essence. Sellers are putting the squeeze on a lot of deals to close sooner, rather than later. This pressure along with all that’s going on in the world, rising interest rates, high volatility, soaring inflation, the war in Ukraine, and a possible recession is enough to make any investor nervous about making an investment decision.
Each step is critical to a successful CRE property investment. Investing in commercial real estate is subject to many risks, in this tumultuous environment. There are several concerns that investors should reevaluate to assure a successful investment.
The most important criteria in a successful real estate acquisition is to buy the asset below its intrinsic value. It is more important to buy a good asset at a great value than a great asset at a good value. Buying a CRE asset above its value or at a low cap rate, is rarely in the long term, a route to a successful outcome. Acquiring commercial real estate at low cap rates is one of the biggest sins that an investor can commit.
(Part 1 of 3)
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