Pays a Fair Cash-on-Cash Return

When you buy property you are taking money out of your liquid financial assets – stocks, bonds, CDs – and investing it into a very illiquid asset – real estate. You were earning a rate of return on your financial assets, such as 4 percent or 6 percent, and you should strive to earn a fair cash-on-cash rate of return on your real estate. To do this, you need to pro forma your deals and buy cash flow-positive properties that earn you decent returns – not those prize properties that are negative, negative, negative.

Isn’t Too Risky an Investment

All real estate is extremely high risk. Development of real estate, land, Tenant-In-Common (TIC) investments, private real estate funds, fixer uppers, etc., all have much higher risk profiles than just simply buying a nice established cash flow investment property. In many of those investments, you will never see a dime of your money again because there are just so many things that can go wrong! So if you want to own real estate, consider simply taking fee simple title in your own name – or an entity you wholly own – to the properties you purchase. In addition, you must do the proper due diligence, analyze, test, review reports, etc., to make a lower risk real estate decision.

Doesn’t Require a Lot of Time or Managing

Some properties just require way too much time and management to make them smart investments. Examples include vacation rentals, low quality properties in bad areas, college rentals, etc. Nice boring properties rented for as long as possible to decent credit profile tenants seem to take the least time to manage. In addition, treating your tenants fairly and with respect goes a long way towards keeping good relations with them; and reducing your hassles when there is an issue you need to address. And believe me — there will be issues!

It’s the nice, boring, wholly owned, in good shape, cash flow-positive properties that are the best investments. They are out there for your picking, but it’s not as simple as finding a property on the MLS and buying it.

You need to do some hard work, research, read up, and make smart, educated decisions to acquire the best real estate investments!

By: Leonard Baron

Whether you’re moving into your first business tenancy or your fifth, simple mistakes are often made by even the most savvy business owners. Key actions taken now can save you time and money over the term of your lease, and will help you avoid these common mistakes:

1. Failing to allow enough time to make fully-informed decisions

Running your business takes up all of your time. However, making lease decisions too late can cost you far more in additional payments. Lease agreements typically have notice periods that give you between 3 and 12 months to notify the landlord of your intention to exercise or forego a renewal option. Do your research: Make sure that this property continues to be right for your business, consider the current size of your lease space, the rent level compared to the market, and the amenities the current lease provides.

2. Failing to consider future business growth and space requirements

Lease terms can often be 5 years or more, but tenants usually make decisions based on what’s happening now. Not providing room for future growth could mean squeezing your employees, sacrificing meeting rooms, and a loss of productivity. Consider your business’ projected growth and factor it into future space requirements. Otherwise, you’ll find yourself constantly moving desks and struggling to work in space that’s simply too small.

3. Failing to understand the finer points of your lease agreement

Many people look at their rent and lease term and believe they know all they need to know about their lease agreement. Commercial lease agreements usually range from 10 to 40 pages in length and contain items that can have significant financial impact to your business. Understand these things up front, negotiate the best terms to suit your needs, and you’ll see real savings over the long term.

By Jack Hayes, CCIM