Costa Bajjali talks About How to Invest in Various Types of Real Estate
The real estate industry can be seen as a complex market and one that only experienced investors are involved in. And while many “expert investors” frequently tap into this market, first-time investors shouldn’t avoid it — purchasing real estate is a smart investment strategy that can be both satisfying and lucrative.
Costa Bajjali, a highly respected real estate broker and developer located in the Houston area, Texas, urges new investors to consider both residential real estate and commercial real estate investments. Commercial properties investments can be as simple as purchasing an existing property based on cap rates / cash flows or as complex as buying undeveloped land and developing and constructing a commercial property. Development investments tend to have better returns, but it comes with the associated development risk. New investors can successfully invest in real estate if they prepare for it, notes Bajjali. When it comes to opportunity for investments, there are no shortages of deals in the real estate industry. Whether you’re looking to invest in residential property, commercial property, retail, office, etc., the real estate industry offers a magnitude of options for investors to capitalize on.
Bajjali shares the best ways to get started in purchasing real estate, no matter the market or niche.
Select a Real Estate Broker that is experienced in finding and purchasing Investment Properties
The first step to purchasing or developing real estate is to find and select an agent that is experienced and is fiduciary to you. If you intend to develop a property, make sure you hire a developer that is experienced in the type of property that you are planning on developing. Developing and building a retail strip center is significantly different than developing and building an Assisted Living Facility. The later, requires specific knowledge in life safety standards as interpreted by and enforced by your local Department of Aging and Disability, and possibly medical building development and construction experience.
Understand Economic Feasibility, Including Risks
The second step to purchasing and developing real estate is to determine its economic feasibility and the risks involved in the overall investment. Like any investment, it’s important to understand the duration of the investment and the projected returns on the investment, but to not overlook the overall risks and the potential of loss. Although the proforma numbers are only an estimate, understanding the practicality of your investment, including costs, revenue, expenses, and returns will better assist in your decisions and success, says Costa Bajjali.
Perform your Due Diligence
Appropriate due diligence is the only way to manage and minimize your risk. It is critical to understand everything about the property you are purchasing. If the investment is a purchase of an existing property with tenants, then you need to know not only everything about property, but also about the tenants. How long have they been a tenant? What is their business and what’s their payment history? What are the lease terms for each tenant, etc. On the other hand, if the investment is the development of a property, then it is critical to understand what entitlements the property has and are there any restriction on the type of use you would like to develop it for. Does the property have the required utilities like water, sewer, electricity, gas, etc.? Is it within a jurisdiction of a city or county that requires zoning? What type of zoning does it have now and what type do you need it to be in order for you to develop it to what you want? What is the process and length of time necessary to change the zoning? Etc.
Determine Your Offer
After understanding all the costs and capital requirements associated with a particular investment, you’ll be more equipped to make an offer price that’s comfortable to you. When it comes to making an offer, there are a few things that need to be considered. The offer you decide to make could set the tone for the rest of the deal.
Costa Bajjali shares three things to consider when determining your offer:
· Research the market and development type. Work with your Real Estate Broker to get appropriate comps for the particular type and the area of the investment. For example, if you’re investing in a residential property, you’ll want to research the area, the average price for a home in the neighborhood, and the proximity to important amenities (i.e., grocery stores, doctors, etc.).
· Walk through. Whether it’s a home, condo, commercial building, or land, you’ll want to ensure you’ve made a physical visit before securing the deal.
· Secure all of your finances. Ensure that you’re pre-approved for credit before you invest into something that is out of your price range.
Getting the property under contract
Be sure to work with your Real Estate Broker and depending on the complexity of the deal, with your attorney to make the offer and get the property under contract. Having a good solid contract with the right length of the feasibility period to complete your due diligence is crucial.
Costa Bajjali on Buying, Owning and Selling Land
The land development process, buying and selling land, is more complex than investing in property and simply following the above best practices, says Costa Bajjali. One of the most important factors when buying or selling land is knowing what can and cannot legally be built on that land. This is an extra step in the real estate investment process with regards to land development.
Fully entitled land, which is land entitled with utilities and possibility of governmental and regulatory approvals for a particular use, is much more valuable to you and its owners than land with an absentee owner. Understanding a property’s current zoning and future land use is critical; this not only sets the baseline of what types of properties can and can’t legally be built on the site, but it also gives investors and land developers a jump start on developing the site.
If you own land that you are trying to sell, don’t be an absentee owner. Work with adjacent landowner and municipalities to make sure your land is entitled and is attractive to developer. This will translate to a better market value and more money in your pocket.