By Anthony R. Bolling, JD, CCIM

www.anthonybolling.com

Individual stocks and bonds. Mutual funds. Precious metals. Certificates of deposit and interest-bearing checking accounts.

18 months ago, ask the “average” investor where he or she directs investment money, and more than likely the answer will include one or more of the vehicles listed above. But what other options are available to the investor who wants to truly diversify his or her portfolio?

Today, (particularly at this point in the economic cycle), commercial investment real estate may be that option. For the individuals willing to take on a little work and research, commercial properties offer a wide range of alternatives, from small multifamily apartment buildings to strip shopping centers to self-storage warehouses. And, with the stock market slowing down ( crashing!!), the long-term outlook for investment properties is strong.

There’s a tremendous range of commercial properties available for the small investor to consider. Each type of property presents its own potential for returns, management responsibilities and, of course, levels of risk. However, a property that is well-managed and properly financed can yield significant returns over the long term.

Investors making a first-time foray into investment real estate should keep the following in mind before closing on a commercial property.

• Establish a realistic objective – Just as one would with stocks and bonds, an investor planning to purchase a commercial property should set objectives that are defined and attainable. Since returns on leased commercial properties aren’t immediately imacted by the short-term roller coaster ups and downs of Wall Street, investors should not expect dramatic short-term returns during the ownership. Smart investors, however, determine an exit strategy for disposition of the property at a prescribed time, preferably when the property has appreciated in value and market demand is strong. Identify what type of factors may trigger the sale (retirement, the purchase of a new home, relocation, etc.), and keep in mind the following: Real estate — governed in part by the economic principle of supply and demand — is not considered a liquid asset.

There’s plenty of capital available in the marketplace right now, and opportunities are available in the commercial sector for investors willing to take some risks. Like any speculative venture, investment real estate may not always perform up to short-term expectations. Over the long haul, however, a well-managed and properly financed piece of commercial property unquestionably can prove to be a solid investment.