When you hear the acronym IPA you likely think of a nice, cold, hoppy India Pale Ale. But, as noted in a recent publication in Kiplinger, this acronym can also serve as a useful tool to guide those who are interested in investing within the commercial real estate market.
Here is how the IPA acronym can guide commercial real estate investment decisions:
- I – Intrinsic value. The intrinsic value of a property refers to the characteristics that are essentially permanent. The location and construction quality of the building are two examples. It is generally wise to purchase a property with high intrinsic value to better ensure a good investment.
- P – Price per pound. Although the intrinsic value is a quantitative tip, this one is more qualitative and subjective. The price per pound consideration relies upon comparing a potential purchase with other similar deals in the area and having a good understanding of market trend. If this comparison results in a good “price per pound,” the deal could result in rewards for the investor immediately.
- A – Affordability. This refers to the product, not the deal itself. It is wise for the investor to consider whether the property would allow for a rental price that target tenants could afford.
When properly applied, tips like those outlined with IPA can lead to a successful investment — possibly celebrated over a different type of IPA. Although these tips can help to start a commercial real estate endeavor, they are just that, a starting point. Investors interested in this market are wise to take it a step further. An attorney experienced in commercial real estate transactions can help.