Investors in California may be interested in exploring the world of commercial real estate for a passive, successful income stream. This type of asset may seem quite different than investments like stocks or bonds, but commercial real estate can be a highly profitable and successful means of securing an ongoing income stream. For investors who want to play a passive role in a real estate project, a few tips can help them to select ideal investments.
A sponsor is a commercial real estate firm or company that acquires and develops a particular commercial real estate complex or project. These sponsors owe their investors a fiduciary duty and must execute their business plans for the project. Experienced sponsors can be more conservative in their projections, but this can reflect a high level of historic success that they wish to maintain. There could be higher returns with less experienced sponsors, but there could also be escalated levels of risk. Investors can choose the type of real estate investment that best works for their style.
Another key issue to keep in mind when selecting a commercial real estate investment is the basis, or the price per square foot, of the development. When the basis is attractive, the property can often be well-positioned to outperform local competitors. If the sponsor purchases the property for a lower basis price, it can both be more profitable even in a challenging market while being able to succeed well in a positive market.
The commercial real estate market can be an exciting and rewarding environment for investors. Whether an investor is exploring the field or managing a portfolio of assets, legal advice may be critical in reviewing contracts, dealing with sponsors and property management companies and preparing for real estate transactions. A real estate lawyer may be able to provide detailed advice and representation throughout the process.
