When purchasing commercial real estate, it's essential to consider several factors to ensure a sound investment. While value-add opportunities may be tempting, it's crucial to purchase properties with low leverage and positive cash flow.
Purchasing a property based on proforma, or future cash flow projections, can be risky. It's essential to minimize risk by going in with a conservative number to ensure there are no issues with cash flow. This approach can prevent over-leveraging, which can lead to negative cash flow and financial stress. By investing in low leverage, you can protect your investment and enjoy a steady stream of income from the property.
Another key factor to consider is personal guarantees. Lack of personal guarantees can be advantageous, as it eliminates the risk of personal financial loss in the event of a property downturn. Long-term fixed-rate debt is also beneficial, as it provides certainty in payments, minimizing the risk of unexpected rate hikes that can eat into profits. Short-term or floating debt with high leverage can be detrimental to cash flow, especially if rates increase unexpectedly.
Investing in commercial real estate with low leverage and positive cash flow can be an excellent strategy for long-term wealth creation. By choosing a conservative approach, you can protect your investment and enjoy steady income from the property. It's also important to work with an experienced commercial real estate brokerage team that can provide expert advice on acquisitions, management, and capital stack strategies.
At Atlas Bay Commercial, our team of experienced brokers can help you find commercial real estate investments with low leverage and positive cash flow. Our consulting arm can also provide expert advice on management, acquisitions, and capital stack strategies. Contact us today for the best commercial real estate brokerage and advisory services in Tampa, Florida.
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