Understand the Size and Value of Your Asset
Investors are meant to receive returns before the manager gets his share of the profits from the sale. As a manager, make sure that all parties involved understand the terms of any transaction that involves the real estate investment. The investment manager should receive a financial reward depending on the investment's realized profits. There should be no hidden fees, and make sure you know the difference between an apartment building and a shopping center.
Avoid the Temptation to Over-Leverage
Use interest-only (IO) mortgage as you invest with a rather conservative loan-to-value ratio, or LTV. As interest rates of real estate investments could rise in certain periods, a conservative LTV of around 50% will give you adequate protection in holding these assets during those times. Moreover, you can be sure that cash flow can be used to pay low interest payments because of the IO mortgage. Additionally, you can reap significant tax benefits from using such conservative leverage strategies.
1. Don't over-leverage.
Monitor the Asset Closely
What is needed in order to ensure effectiveness in handling real estate investment is a detailed analysis of the profile of the location in terms of economic and demographic data. This can also aid in the thorough selection of assets. Such analysis and assessment must validate the profile of the property. In addition, such micro and macro analyses must be done continually so that you are aware of the current relative value and risk profile of a piece of real estate property.
Be Reasonable About Returns
Risk and return in the commercial real estate market are usually efficiently correlated. Thus, as an asset manager, you need to be transparent about its returns. The returns must be reasonably based on the asset profile as well as the asset manager. While taking note of liquidity risk, commercial real estate investments generally have a current cash flow of 6.5% and a potential for growth in the long term while exceeding inflation.
Get Real Estate Investors Insurance
Real estate investors insurance is the only thing that can give you peace of mind in case there are man-made or natural disasters that will strike. Always check the coverage for this kind of insurance. Usually real estate investors insurance covers certain specifications of property. It usually covers damage from flood, earthquake, hurricane, and builder's risk for those under renovation. Other coverages include war, nuclear outbreak or general pollution.
Some Final Reminders
As a real estate investment manager, you may want to secure your investment by adding coverages and premiums. This should add to your peace of mind. At , we ensure that the assets that you manage are well-protected with comprehensive insurance policies but reasonably affordable. If you want us to assist you, contact us at (636) 220-6377 or Click Here to ask for a free quote.