Investing in real estate has always been a lucrative business. There are many sectors however that require quite a bit of knowledge before investing. Luckily for you, we can summarize that knowledge and present it to you! In this article we will discuss Office Investing and what to look out for.
Market timing has always been very important in any sector of real estate. Everyone wants to buy low and sell high, never the other way around. With today’s all-time low rates now is a good time for real estate investing. Click here to let the pro’s handle all of this for you! How will you know that the timing is good? Look at cap rates – a good cap rate is typically 7% in one area. So don’t buy if it’s less than that.
The first concern when investing in real estate is “Location, Location, Location”. So make sure to follow that old saying and pick a location that will be easier to fill, otherwise it’s a good idea to pass on it.
Credit quality of tenants
You don’t want to be stuck in a position with a long term lease with a rather unfavorable tenant. Stick with any property that has class A tenants that will continue to rent through any season or economic downturn. A tenant with a record of consistent payments is quite valuable! This is especially important in light of COVID-19 as it is a terrible time to rely on marginal tenants paying to cover your expenses
The income you will receive is deducted from the net of maintenance and capital expenditures. Buying property in poor condition is a terrible choice and will scare away most future buyers or lenders. Ensure you have a solid roof as this usually is a large repair for most investments. Ensure that the building will not be a financial drain with endless repairs.
Cap rates – this is one of the most important factors when investing in office spaces. Try and stay on the right side of the spread (the spread is the difference between interest rate on your loan and the cap rate) A 3-point spread yields around a 20% cash-on-cash return, while a 2-point spread returns about 15% and a 1-point spread yields around 10%. Generally try to stay within a 2 point spread.
Investing in real estate is always a good option. Make sure you consult with 770 Capital Investment Group so you can get the best bang for your buck while working with knowledgeable experts who can help you navigate the waters! Contact us at 770-227-4825.