What 'Baby Investors' NEED TO KNOW

By
Commercial Real Estate Agent with Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker AZ BR 528507000

My office was built to serve investors in real property, especially

Mohave County commercial real estate.

You probably figured that out, right? After all, it is called

Next Wave Real Estate Investments LLC.

 

We LOVE investors.

But baby investors . . . sigh . . .

Here's why we will, 99.999999% of the time refer or outright reject 'baby investors':

 

First, let's DEFINE the term. A 'baby investor'  is someone dipping their toes into commercial and/or real estate investment  for the first time.

That's WONDERFUL. We can help.

If they can be helped.

This means they must understand what they do not know

. . . or think they know that just . . . ain't . . . so.

 

Here's what 'baby investors' do not understand or have incorrect preconceived notions about, as a general rule:

 

  1. Real estate is NEVER, EVER COMPLETELY WITHOUT RISK. Anyone who tells you there is no risk is lying. You CANNOT eliminate risk. There are too many factors: changes in development nearby, market swings, dips and bombs, political climate and other economic factors. You can lose money. You might.

  2. This is not like putting in money and then collecting a check without outlay of expense. If you buy an absolute net leased property, perhaps (be willing to spend big bucks). You can do that to a greater degree purchasing notes. But even then, default and foreclosure are possible. Also, the borrower may luck into cash to clear their debt, and unless it's in the deal that they can't prepay . . . there goes your interest income.

  3. YOU need to monitor property management. Again, there is no such thing as 'set and forget'. At the end of the day, it's your baby and you'll need to burp it.

  4. Maintenance and repair vendors come and go. Unless you have a construction company, you may need to occasionally replace good help  and there could be hit and miss involved.

  5. If you're geographically distant from the property, you may need to find and pay someone to keep an eye on it, besides property management. Someone who ONLY cares about YOUR property. Or plan to come into town frequently enough to DIY. No one will care more about your property than you will. Guarantee. You may also derive tax benefits from periodic travel to monitor your property - check with your CPA.

  6. You CANNOT DICTATE how other people live or operate their business. They pay for the privilege  of living or operating there, and if it's legal to do so and your lease isn't specific that they cannot be messy or noisy or not your BFF . . . leave them be.

  7. MARKETS. CHANGE. There is no crystal ball. We cannot pinpoint-accurately predict trends, as real estate remains national, regional, local and hyperlocal and most of all, UNIQUE. We cannot guarantee with certainty that rents will increase, properties will appreciate or vacancy rates will stay as is. YOU will need to again monitor your hyperlocal market for development, economic and political factors and demographic changes. Your  commercial investment real estate broker  can help with that.

  8. WE - your local real estate professional - know more than you, your relatives, your non-local real estate pals and your 10000 closest Facebook friends. Clear your head so we can feed it. And if you can't trust what we know and do . . . don't waste either of our time.

 

I've always loved real estate because nothing is more like legalized gambling - except it is possible to play an intellectual game.

And even if risk cannot be completely eradicated, it can be assessed, limited, mitigated, leveraged or passed through.

 

We know how, baby.

How can we help you?

 

 

🎶 I could but I won't be

You can but not with me

It's all a mystery

Locked out without a key🎶

 

 

 

 

Comments (16)

Mimi Foster
Falcon Property Solutions - Colorado Springs, CO
Voted Colorado Springs Best Realtor

What an informative post! Of all the things I wish people understood in their idealism of investing is . . . YOU MAY LOSE MONEY. Back in '08, an investor I had worked with lost his shirt on a deal (he had made hundreds of thousands of dollars with me). It was, of course, my fault, for not knowing the market was going to crash. Not for the faint of heart, that's for sure.

Oct 13, 2019 09:03 AM
Candice A. Donofrio

Another baby investor foible - thinking everyone except them has accountability. And a crystal ball!

Oct 13, 2019 09:50 AM
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Candice well said...Even the coupon investors can have major surprises when big companies like Macy's leave their premises because of consolidation, or Lowe's for instance...You have to be on top of it and know what you are doing.  A

Oct 13, 2019 10:00 AM
Candice A. Donofrio

Yep! Anchor tenants do leave! One building, a huge medical products company has moved 3x in 5 years! Another lost Sears and JC Penney. And we must stay informed as to the trends. I am a subscriber of Plain Vanilla Shell at the suggestion of a national retail tenant client who is an attorney in 3 states. PVC gives us all the latest dirt on who's coming, going, getting sued and settling. LOL

Oct 13, 2019 10:04 AM
Nicholas Crane
Woodland Companies - Cadott, WI
Managing & Appraising Forest Land

Candice A. Donofrio Thanks for sharing this great information on investing, I know but I do not know.

Oct 13, 2019 11:42 AM
Candice A. Donofrio

Welcome!

Oct 13, 2019 11:44 AM
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Candice- excellent post for baby (or any) investors. I can even remember when an agent, many years ago, told us You can never go wrong investing in real estate.  Hold on their Bucky. For all of the reasons you mentioned above, investors need to face reality and understand that while the rewards could be great the losses could be as well. 

Oct 13, 2019 07:21 PM
Candice A. Donofrio
Yeah Bucky needs to take a seat, LOL
Oct 13, 2019 07:50 PM
Wayne Zuhl
Remax First Realty II - Cranford, NJ
The Last Name You'll Ever Need in Real Estate

Fabulous resource for new investors. I especially would highlight your statement about new investors needing to know that they don't know everything.

Oct 14, 2019 03:29 AM
Candice A. Donofrio

Right, and who does know it all? But at least we can guide to the proper resources.

Oct 14, 2019 05:34 AM
Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Your words are true and I have had a few baby investors come my way and they just don't get it.

Oct 14, 2019 07:55 AM
Candice A. Donofrio

It usually begins with "I have a dream" LOL

Oct 14, 2019 08:23 AM
Bruce Walter
Keller Williams Realty Lafayette/West Lafayette, Indiana - West Lafayette, IN

Ms. Candice, what an incredibly informative post, and as a novice commercial investor I am living through so many of the important points you elaborated upon!!!!  It is A LOT of work and it is hard to get contractors to do necessary work.  

As an aside to your point about not being able to predict the future we have concerns as tax free Purdue University has opened up its research park to a HUGE office/retail space area and the largest employer in our area is now going to be in competition against other small commerical retail/office space investors and they have the luxury of not paying property taxes so it will be hard to compete with them.  Things do change and that was not on the horizon several years ago.  

After reading your closing paragraph about "clear your head" I was expecting a video from Grace Slick and some White Rabbit!!!!   ^_~

Alternate title suggestion:  "Throw the Baby Investor out with Bourbon and Water"????   (Maybe if you lived in KY and not in tequila laden AZ???)   ^_~

BTW, this should have been featured!

Oct 14, 2019 08:54 AM
Candice A. Donofrio

Ha, Teach!


Last week 3 of my posts were featured, and one was 'unfeatured' so I wouldn't occupy the whole damn homepage! LOL
That is a SUPER interesting bit of info re Purdue!! That kind of stuff can influence big time!


One Bourbon, One Scotch and One BEER!

Oct 14, 2019 09:42 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Candice:  Maybe truth serum is needed?  Can you handle the truth? Can you REALLY handle it? Let's see...

Oct 14, 2019 12:12 PM
Candice A. Donofrio
Neuralizer is needed! LOL call in the MIBs!
Oct 19, 2019 06:46 PM
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

                                    

                                     Thanks Candice!!

Oct 19, 2019 06:30 PM
Candice A. Donofrio
Thank you sweetheart!
Oct 19, 2019 06:47 PM
Matthew Klinowski, PA
Downing-Frye - Naples, FL
Golf Community Real Estate Specialist

Good morning Candice, great advice for new investors. It seems more and more people are looking to make an investment in property.

Oct 20, 2019 04:46 AM
Candice A. Donofrio
GM, thank you! It's a good investment when it's a good investment! LOL
Oct 20, 2019 05:34 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Candice A. Donofrio - there are people out there who have read a book abpit "my proven system."  Unfortunately, they have only heard about reward not risk.

Oct 20, 2019 05:16 AM
Candice A. Donofrio
GM, exactly.
Oct 20, 2019 05:34 AM
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Candice. I was an investor before I was licensed and agree with everything you have said here.

Oct 20, 2019 06:35 AM
Candice A. Donofrio

GM, thank you.


 

Oct 20, 2019 06:43 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Candice A. Donofrio,

I have a lot of experience as a commercial investor and I give you Kudos for this post.  There can be a lot of risks. I personally will stay away from LLC investments in the future.  Unless you are the managing partner, you give up control that you may not want to give up.

Oct 20, 2019 01:06 PM
Candice A. Donofrio
Good point!
Oct 20, 2019 01:20 PM
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Well said Candice. My sister and I own several commercial properties! We are very lucky, we have good long term tenants with triple net leases. They are as close to "set and forget" as one can get

Oct 20, 2019 06:08 PM
Candice A. Donofrio

Indeed!

Oct 21, 2019 04:38 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good evening Candice A. Donofrio ,

I'm so glad Kathy Streib featured you post in her "Ah-ha" moments for the week. Of course this one should have received a gold star and maybe now with more traction will have one waved!  Excellent info and great message ..there is always risk..bu you know more than the investor and they need to listen to your advice!

Oct 20, 2019 07:58 PM
Candice A. Donofrio

That was cool! Hahah!
I'm fortunate to have some pretty sophisticated clients.

Oct 21, 2019 04:40 AM
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, eXp Realty - Kalispell, MT
Helping your Montana dreams take root

I laughed at the "it's your baby and you'll need to burp it" about the property management, but it's just as true about maintenance/care and feeding of homes/buildings. I might have to use that statement some day.

There are buyers, investors or otherwise, who think they are ready to invest because they attended a seminar or watched HGTV. It's not that easy and there is always risk.

Great post!

Oct 21, 2019 06:48 AM
Candice A. Donofrio

One of my GRI classes was property management, and the instructor has a huge company in Phx. That was his favorite 'ism' and I love it!

Oct 21, 2019 06:54 AM

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