Commercial real estate in California can be a fantastic investment, but it requires a lot of capital. While other types of entrepreneurs can raise money in stages, commercial real estate developers have to secure a large sum of money before a project can even begin. To finance their projects, real estate developers often need to raise funds from several different investors at once.
To finance commercial real estate projects, developers usually prepare a single package of information for all would-be investors to look at. These real estate offering documents include information about the commercial real estate project and detailed assessments of the project’s feasibility and inherent risks. If developers are not transparent about the risks of a commercial real estate investment, they could face legal repercussions in the form of lawsuits from investors or lenders.
Commercial real estate development plans will typically include clear timelines and projections about investment returns. Many investors are drawn to commercial real estate because it can often provide a consistent cash flow that some refer to as ‘mailbox money.” Developers will usually try to showcase how much income investors can expect to earn and how soon they can expect to begin receiving payments.
A person who is interested in investing in a commercial real estate development project should carefully assess the risks of the venture. Some investors are comfortable taking bigger risks than others, and an investor should consider how big of a risk they are willing to take. An attorney may be able to provide advice to clients while they are considering a particular commercial real estate investment.