Everyone has different philosophies on investing, diversifying and risk. You know you want to add real estate into your investment portfolio but are unsure if you want to delve into commercial or residential. Before you do anything, take the time to understand the nuances of each niche. Determine if commercial or residential real estate is right for you in Inland Empire is an important step before making an offer on anything.
Investing in anything is a risk. Depending on your experience, it may be easier to jump into residential real estate before commercial real estate investments. After all, most real estate investors start by first buying their own home. Then they leverage equity into bigger and bolder investments. If you don’t have any experience, starting with residential properties generally requires a softer experience rating. The costs are often less but more importantly, the transaction process is less complex.
Consider your experience and the experience of any partners as well. You could have a partner who has much more experience than you who is able to walk you through the process. His experience becomes your experience. Leverage experience the same way you would leverage the equity in a home.
Evaluate the market conditions. This is a requirement before any real estate investment, residential or commercial. However, you want to take a look to see if there are the difference in the two niches when developing a business plan. You may see that a hot fix-and-flip market is slowing down while the commercial market is heating up due to a new city development.
Take a look at factors that affect residential purchases including new schools, new home building, and city planning programs to improve older neighborhoods. Also, consider the business environment to determine if more businesses are moving into the area and why. Learn what the city’s process is for residential and commercial processes. You may find one line of attack more favorable than the other. Don’t hesitate to speak with local real estate agents and contractors as well to get a feel for common obstacles and general market conditions.
Risk Aversion Level
Investors must consider their risk aversion level. This is an assessment of your emotional tolerance to problems when your money is involved as well as your ability to take a financial hit if an investment goes south. Things to consider are whether or not you can plan for a short-term flip but financially deal with holding for a longer period of time if something happens to change the dynamic of the market and the investment. Evaluate your financial scenario to see what happens if you lose money and how you can rebound. Commercial real estate is a bigger risk because it is a bigger investment with many other factors affecting pricing and ability to lease or sell.
Opportunities and Desire
In reviewing the market conditions, you should see what opportunities exist. Obviously grabbing low hanging fruit is an ideal opportunity for you to buy property and invest intelligently. Even if you don’t have experience if the best opportunity is commercial real estate and you have the right team to help you, your desire to succeed becomes a big factor to your success.
Consider all options as an investor and business professional before making final decisions. If you need professional advice on the market in Inland Empire, don’t hesitate to contact us by phone today at (951)563-5093. We are professionals dedicated to your success.