4 Strategies For Lowering Risk In Commercial Real Estate Investment

4 Strategies For Lowering Risk In Commercial Real Estate Investment

We all know the great returns and benefits of investing in commercial real estate. What has kept some on the sidelines is the perception of risk, and what they don’t know. Let these four strategies be your catalyst for taking advantage of all this asset class has to offer, even above and beyond its brick and mortar security.

1. Reducing Risk with Leverage

One of the great benefits of real estate investments is the ability to soundly leverage capital. This reduces exposure in any individual investment or geographic area while fueling greater portfolio diversification and continuity in returns and income. It also powers faster wealth and income building, while having others effectively pay for your investments.

There are two main ways to achieve leverage in assets like multifamily properties. The first is financial leverage through loans. In commercial real estate, this can be done with non-recourse loans which further protect investors. The second option is to team up with equity partners to achieve leverage and gain more parties who have a vested interest in your success. Or you may even choose to combine both of these options.

2. Insurances

There are a wide variety of insurances available to real estate investors. Many of these coverages are very affordable and offer great outcomes, even in the worst case scenario.

These insurances include:

●Title insurance

●Hazard insurance

●Gap and income insurance

●Landlord insurance

●Business insurance

●Key person insurance

●Umbrella policies

3. Smart Asset Protection Structures

Savvy investors have a whole menu of legal structures at their disposal for protecting their privacy, lowering tax exposure and limiting risk. This can include LLCs and trusts. Some may even choose to layer these entities for even more protection. They can be a very low cost to set up, but with huge financial benefits.

4. Professional Property Management

Professional property management provides many essential protections for investors. They act as a legal buffer to help property owners avoid emotional mistakes and exposure to risk that comes from not being in tune with daily changes in landlord-tenant laws. Pro-management is full time and has the resources to be on top of your assets 24 hours a day, 365 days a year. Just as importantly, they have the industry experience and contacts to maximize upside potential, avoid vacancies, and keep rents at premium levels.

What’s even better is that all of these strategies can be combined together to ensure even safer and more profitable investments.