First-Time Investors Could Get a Perfect Mix in Investing to Commercial Real Estate
With how complex and high-risk investing can be, first-time investors can have difficulty finding the right avenue as well as how to go about the process.
According to Alec Pacella, managing partner at NAI Daus in Beachwood, and Dan Burkons, senior managing director and founding member at Marcus & Milllichap in Cleveland, first-time investors should look to commercial real estate as a viable option.
“The best time (for first-time investors) is when they have enough investable cash and assets that they can afford to not be liquid,” Burkons said. “Unlike stocks and bonds, you can’t just sell it with the click of a mouse. You have to be able to invest and not need it or have it for a couple years.”
Pacella said the best time to invest depends on the individual investor.
“Investing in real estate is one thing, but there are so many other things that go along with it,” he said. “People tend to get so caught up, but real estate is really cyclical. Markets may take a stumble, but it will cycle back around, and you’ll do fine. But it has to be the right time for you.”
Pacella said investing in commercial real estate can take time.
“You should time the market and you need to be in a comfortable position to make it successful in the long haul,” he said. “Any real estate deal is a good deal as long as you have the staying power. When you have troubles is when you don’t have the resources to keep it going or the time to devote to it.”
Burkons said commercial real estate is a sound investment for a few reasons.
“(Commercial real estate) is a tangible asset that you can actually control how much money you make or don’t make,” he said. “You control it. Success and failure depends on you. It’s also a very tax advantaged investment.”
Pacella said investing in commercial real estate is a good first-time investment because it’s not as high risk as the stock market and not as low risk as bonds.
“Real estate slots right in the middle,” he said. “It has higher returns than bonds with a little more risk and lower returns and risk than the stock market. So, many people look to invest in (commercial real estate) because it offers some in each. It’s a relatively good and safe way to build your assets.”
When counseling first-time investors, Burkons said his biggest piece of advice is to not be afraid to part with the investment.
“Don’t be afraid to sell if the value is increased,” he said. “Don’t be afraid to sell and cash in the profit. You can always take that money and buy or invest in something else.”
Pacella stressed the importance of being able to invest just as much time as money in the process.
“People go into commercial real estate and think they are going to double their money right away,” he said. “You need to give a deal a long enough time horizon to do what it needs to do. It takes a while to buy and sell. The important part is the middle period. You can’t set yourself too short of a timeline. As long as you have the mentality of a long investment horizon, you’re good to go.”
Article Resource: Cleveland Jewish News