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Real Estate Investing: Macro Viewpoint

There are many benefits to investing in real estate and at Clear Summit Investments, our mission is to create opportunities for investors to reliably and transparently grow their wealth through the power of community focused real estate. In this blog, the goal is to provide a bigger-picture, macro viewpoint into the world of real estate investing.

At a very high level, there are two main parties to any real estate investment: users and investors. Users can be defined as users, or occupants of the space. This can include tenants of a residential property, businesses that need office space for their employees, or manufacturing companies in need of space to run their operations. Users always analyze a space that meets the needs of their business in terms of:

  • Location

  • Size and layout of the space

  • Quality of the building

  • Proximity to other businesses that might be suppliers or customers

  • Costs of the space, or lease terms

Investors can be defined as those that make investments in spaces that are or could be leased to users. Investors are primarily interested in maximizing their rate of return (RoR) relative to the risk assumed by acquiring a space or property. Generally, the higher the risk of the investment, a higher RoR will be desired. It is important for investors to understand risk tolerance to properly define projected returns within the confines of the assumed risk of an investment.

The key point here is that investors need users and users need investors. A property may be a great use for a user but not a great investment for investors. On the flip side, a property can be a great investment, but have no use for a user. The goal is to marry the needs of both parties to the real estate "transaction."

As investors, a strategic decision analysis is required before any acquisition can be made. In the due diligence, or underwriting phase of a project, investors must understand important factors such as rent levels, construction costs, market conditions and cost of capital to make sound business decisions. This analysis must also include supply and demand analysis (Does the area and users support the use?), location and site analysis (Does the location of the site support the project? Is there projected future growth of users?), political and legal analysis (What uses are allowed from the site? How can the land be developed?), and financial analysis (Does the investment provide the required RoR to investors? What are the conditions of the capital market?). It is important that all aspects of this strategic analysis are completed and continuously updated to ensure that underwriting is accurate and such, sound business decisions can be made as investors. Through this analysis, investors are able to use the gathered data and information to ensure acquired space will have a demand for users of the space, creating the win-win scenario for both parties.

At Clear Summit Investments, we pride ourselves in our attention to detail in underwriting deals we plan to acquire. This has allowed us to build our portfolio of sound investments while meeting expectations of investor return on investments.

As mentioned, the goal of this article was to provide a high level overview to the world of real estate investing. Please feel free to reach out to us with any questions or if you would like to receive any information on our current and future deals.


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