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CRE investments are among the most popular niches of property investments in the market today. But this does not mean that one can invest however they want. Rather, there needs to be a careful consideration on how one can capitalize on market trends with an eye for mitigating any future liabilities or losses one may eventually have to endure. The following is a list of five key CRE investment strategies which will help you generate a strong investment portfolio in 2019.
Essential Strategic CRE Investments for 2019
1. Invest in Real Estate Data Analytics
Real estate data is easily the most reliable resource of discovering the trends driving the market.
However, it will take some amount of expertise, insight and investments in a data analytics company to grasp the pulse of the market at any moment.
For CRE investors this is very important as it ensures they have a solid data-derived basis for making their investments. Now, it is entirely possible to interpret real estate data with some expert advice. However, there is much more to analytics than simply drawing up a market growth trajectory. Identifying, compiling and streamlining data is critical to ensuring it can be interpreted effectively.
For most investors, taking up this long and number crunching process is not really rewarding. So, the best alternative is to simply invest in data analytics firms and steer the direction of the company towards real estate analytics which can facilitate smarter CRE investments.
2. Consider Offering Mezzanine Loans
Mezzanine loans are usually in rather high demand owing to formal real estate lending institutions limiting their loans to at max 75 percent of the overall value of the property. Mezzanine loans can offer a viable alternative to those seeking greater loan valuations.
By offering loans of up to 90 percent of the estimated value of the property, investors can derive considerable income from every loan handed out. It is not uncommon for mezzanine loan lenders to get as much as 8 percent interest on their loans and even between 20 to 40 percent of the property ownership depending on a number of factors.
Generally speaking, the return rate on mezzanine loans of any value needs to be between 15 to 18 percent to ensure fair returns. Taking equity risks also enhances the overall benefit the lender gets and so, it is a good means of securing investments in projects.
3. Liquidate Net Lease Assets
The net lease sector has been experiencing a bullish phase in the past five years or so. Investments in this sector have also increased considerably. But this means that the market is anticipating a downturn in the near future. Combined with certain changes in economic policy in the US, this is very likely to result in a sizeable increase in GDP growth which can adversely affect the net return from such properties. So, it would be wise to sell of net lease assets while the market is still in a positive position.
4. Invest in Real Estate Property
Industrial properties are boom at the moment thanks to the proliferation of the ecommerce sector. This boom is expected to last till 2019 and beyond as well. So, this is a good time to invest in commercial and industrial real estate. The return rate from these property markets is not particularly stand out but it does offer a fair degree of consistency. Considering the upward incline of e-commerce sectors, the establishment of strong logistical networks and demands from both national and international markets at an all-time high.
5. Sell Your Core Assets Only in Relevant Markets
The investments in prominent commercial real estate like large business centers and apartment complexes are currently oversaturated. The selling rate on these is also considerably higher. Any retail investment made in these markets needs to be consolidated and reinvested in secondary markets where the yield will be much more favourable. Higher capital rate properties should also be considered as strong avenues for investment while more economical retail property options can serve as a place for any minor investments.
Different niches in the CRE market are showing different upward and downward trends. It is wise to examine the trends in each segment carefully and plan out readjustments to your investment portfolio to align with emergent trends and long-term return prospects.