Commercial real estate can be a rewarding investment for many in Missouri, especially those who wish to profit from a passive investment in the market. While investing in commercial real estate is far different than dealing with traditional securities, it can be a profitable, successful and secure opportunity. There are a few points of guidance that investors can keep in mind when selecting a real estate investment opportunity that is well-suited to their portfolio.
First, it is a good idea to review the sponsor of the project. The sponsor refers to the company or real estate development firm that is acquiring or developing a particular commercial property and seeking investors for the project. Sponsors, who are fiduciaries for project investors, have a responsibility to follow through on their business plans. Investors may have a choice between a more experienced sponsor with a long track record and a less experienced sponsor promising higher returns. In general, projections for experienced sponsors can be lower, but they are accompanied by a lower level of risk. Newer sponsors can promise higher returns, but the investment bears a greater risk of not meeting its goals.
Another key factor to watch out for when selecting a commercial real estate investment can be a transforming market. In this market, the sponsor could pay slightly above the going rate for a property and still produce strong returns due to a forecasted upswing in local valuations. Key metrics like spikes in population, job growth and other factors can help investors to identify promising markets.
Investing in commercial real estate can produce strong returns that continue to grow over the years. When considering an investment in commercial property, a real estate attorney can provide advice and representation while reviewing contracts, working with sponsors and organizing real estate transactions.