Commercial real estate is a complicated industry, yet there are some things that are quite simple…and this is one of them. Here are two questions that every commercial real estate investor should be asking themselves prior to beginning a project. Commercial real estate, or CRE, deals with complicated, valuable assets. You may think that the most important questions a CRE investor can ask themselves revolve around financing or accounting. In actuality, the two best questions serious investors must ask themselves are a combined total of just five words. When asked at the right time, these five words help investors better understand wants, needs, and how to achieve their goals.
Two Questions Every Commercial Real Estate Investor Should Ask
Ask Yourself "Why"
The word “why” can be a powerful one. Experienced investors and advisors will tell you that they use it to gain deeper insights about a CRE project. The answer to the “why” helps investors get closer to the information they need to take the appropriate actions to achieve their investment goals. Here are some examples on when to ask this simple, yet powerful, question of “why?”
- I bought this CRE asset to hold it long term. Why?
- I will manage the CRE asset myself. Why?
- I prefer my tenants to operate on short-term leases. Why?
As long as the answer to the question isn’t completely obvious (and sometimes if it is, too!), “why” is one of the most powerful questions that you can ask. It can also be a good follow-up and, with the addition of a few words here and there, can even be used a few times in a row. Here’s an example:
“I prefer my tenants to operate on short-term leases.” Why? “Because I have been burned in the past when e-commerce took off and brick and mortar retail stores tanked.” Why is that a concern now? “I prefer low vacancy rates, and to keep a steady, consistent income stream.”
What if You Don't...
Investors, developers, and advisors can reveal true motivations by asking the second question: “What if you don’t..” This question is important in determining motivations of buyers, sellers, investors, and developers. For example, if a developer is considering selling their asset or building, they should ask themselves “What if you don’t sell the building?” This question will generally lead to two possible outcomes. The first, the building owner will say they are fine holding onto the asset. The other outcome is that they will reveal that the option to sell now is too attractive to pass up. Whatever the reasoning, the answer to “What if you don’t…” will help investors determine the next appropriate step in the investment or development process.
Casey Development, Ltd: Commercial Real Estate Advisors in Central Texas
These two questions are at once both simple and difficult to ask. Though they are simple, they carry weight and are powerful. At Casey Development, we’re committed to helping our clients uncover the motivations as to the why and the what if you don’t scenarios. If you’re interested in learning more about our commercial real estate development services in Central Texas, contact our team today.