Investment Property: What's the Difference?

Always understand your investment. Many great investors keep the key rule in mind and that is to never invest in anything you don't understand. Know your product, or hire people who do.

It is too easy to fall into the trap of the "Great gains with little risk" speech. Do your homework. Some investments may require more time and maintenance than you are prepared to do. Some investments do not pay good dividends at all, but the flyer shows it as a great money-maker. Make a pro-forma. Get an APOD(Annual Property Operating Datasheet). These are useful tools to understanding your investment goals and keeping on track. Too often investors get off course. There are always circumstances that arise with Real Estate investments. For example, Your retail tenant is in a fixed 5-year term with 3 years remaining has just left in the middle of the night. Now you are left with the financing payments and little recourse to get the remaining lease dollars from the last tenant because he has left the area or gone bankrupt. You have also borrowed against the lease income to finance another building. This is a 'House of Cards' scenario. With a proper business plan, you may be able to avoid over-leveraging. You may be able to have contingency plans in place with professionals on stand-by if you need to rent out the space immediately.

Another thing. There is a difference between residential and commercial tenancies. Your residential tenants are under different laws than your commercial ones. As a landlord, you may lock the doors and seize assets left behind in a delinquent commercial tenancy. Residential is more complicated. Know your stuff.

Be careful out there.

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