Acquiring CRE assets with high leverage is another common investment risk. Many people will be lured into using excessive leverage when the market is booming, inflation is high and prices are rising, like they are now, however most of us know that whatever goes up must come down. When that happens the economy and markets drop like rocks.
As is any industry or business, there are good owners and managers and bad owners and
managers. This is very apparent in the CRE industry, especially with apartments. Apartments are the most management-intensive of all real estate assets due to the large number of tenants and leases, high levels of employee turnover and poor management policies.
Be wise and sharpen your pencil! A prudent investor always considers the cost. Just because
there is a need for affordable housing, make sure you can afford to provide it. My motto is to
measure twice, cut once. Because sometimes, the best deal in commercial real estate is the
one that you don’t do.
(Part 3 of 3)
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