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How to do Crowdfunding for Real Estate Development in Dallas, Texas

How to do crowdfunding for real estate development in Dallas, Texas

How to do crowdfunding for real estate development in Dallas, Texas

Crowdfunding is a way in which real estate developers raise capital. It is a way investors raise capital by reaching out to a large pool of investors who contributes a little amount of money. Crowdfunding is different from the traditional way of raising money in that it is usually done online.

Real estate developers use their crowdfunding websites and social media platforms to reach out to more investors who are interested in investing.

Real estate developers have adopted crowdfunding as an alternative traditional means of raising funds for real estate projects. Crowdfunding is a better alternative to traditional bank loans as it entails very low-interest rates.

Benefits of Crowdfunding

Unless you’re as wealthy as Bill Gates or Warren Buffet, you will most likely need investors to be able to acquire the amount of money you need for a real estate deal. As a developer, you will most likely need investors who want to invest in order to be able to generate capital for a real estate investment.

A lot of developers and investors have chosen crowdfunding as an alternative way of raising funds needed for real estate projects.

There are several benefits of crowdfunding which include:

  1. Crowdfunding increases your chances of raising money to fund your real estate investment

With crowdfunding, you have easy access to credits and capital without going through the stressful procedures of getting a loan. As an agent investor, you are able to keep your personal funds for other uses and keep your personal credit scores intact.

It helps you to secure funding for real estate projects when other traditional means of raising funds are not available or are limited.

  1. Crowdfunding helps to grow your investor network

Through crowdfunding, you are able to reach out to a lot of investors across your state, country and all over the world. You get to communicate and make deals with a lot of investors and grow your investor network. 

  1. It helps to save time and money

Crowdfunding helps you save time and money as you only use an online platform to reach out to lots of investors who want to invest. It takes a little amount of money and time to create a crowdfunding website compared to when you seek for loans via traditional means. You can also make use of your personal social media platforms to reach out to investors who are willing to invest.

  1. You gain access to lots of contributions and feedback from your online audiences.

Crowdfunding is a way to get feedback and contributions from the online audience about you and what you do. As an investor or developer, it is important that you pay attention to what investors are saying, their feedback and contributions.

From their feedback and contributions, you gain access to important information and knowledge on how to succeed in your fund sourcing campaign from potential investors.

  1. It is also a marketing strategy to inform people about your business and what you do

Crowdfunding is a marketing tool to promote your brand. Apart from launching a fundraising campaign, it is also an opportunity for you to promote your brand and what you do. It is an avenue to sell yourself as a reliable and professional real estate developer/investor. 

Crowdfunding Channels to source for funds

As a real estate investor who is looking for ways to expand and grow his/her portfolio, there are two crowdfunding investment channels to seek funds from willing investors. These are:

  1. Equity investment

Equity investment gives investors an equity stake in the real estate property/investment. It effectively turns investors into shareholders. Equity investment is what most real estate investors are willing to invest in because it yields higher returns than debt investment.

Returns are based on rentals income of the property. Investors also earn a share of the appreciation value of the property in case the property is sold. Payouts are usually sent quarterly.

  1. Debt Investment

Debt investment means the investors are basically lenders to the developer/property owner. Each Investor receives a fixed amount based on the interest rate of the property mortgage loan as well as the amount invested. Payments are usually given every month or quarterly. Investors are given priority during property payouts.

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How to Invest in Commercial Real Estate Texas

How to Invest in Commercial Real Estate Texas | InvestmentClub360

How to invest in commercial real estate Texas

Commercial real estate (CRE) is a profitable investment sector because of its growth potentials, consistent investment returns, and passive income. CRE is becoming increasingly popular with investors as an alternative investment.

If you want to make more profits as a real estate investor, investing in commercial properties yields more income than investing in residential properties.

However, you need to know how to invest in commercial real estate so as to maximize profit and avoid the risks of running into a loss.

CRE has the potentials to be increasingly profitable, most especially if you invest in the right location.

Texas is a very big state in the United States. It has a population of nearly 29 million and the land of about 267,000 square miles. Texas is one of the three states in the United States that contributes 48% of the total population growth in the U.S. Texas has the second-largest economy in the U.S with a GDP of $1.803 trillion in 2018.

Investing in commercial real estate in Texas is a very profitable investment in which real estate investors are sure of making good profits on their investments. 

Why invest in Commercial Real Estate in Texas

Texas has one of the lowest unemployment rates in the United States with its unemployment rate at 3.4% in Oct 2019. This makes Texas a desirable location for foreigners who are seeking jobs and better living conditions.

There is no state income tax in Texas which promotes a business-friendly environment. Texas is being ranked as the second top state for business in the U.S.

Investors who are looking to invest in commercial real estate in a state with stable growth rates, better opportunities, and long-term investment growth are advised to look into investing in Texas commercial real estate market.

As a real estate investor, you should invest in Texas commercial real estate because:

  • The population of Texas keeps increasing as foreigners and even locals are relocating to Texas due to its high employment rate and good economic condition.
  • The economy of Texas is always growing and it is not expected to fall.
  • Tax rates for residents and businesses are less in Texas.
  • The increase in population and businesses lead to an increase in rentals which benefits commercial real estate owners.
  • Commercial real estate properties are always sought after due to the increased number of businesses.

How to get started in commercial real estate

You must first do your homework and thorough research before investing to prevent failure and losses. You must know the ins and outs, dos and don’ts of commercial real estate.

Below are some vital tips you need to follow for a successful commercial real estate investment:

  1. Understand how commercial real estate is different from others

The income from commercial real estate is usually larger resulting from longer leasing periods. A commercial real estate investor has better potentials and opportunities to earn a higher income than a residential real estate investor.

The location of the property and the type of tenant also has a great role to play in determining the demand for the property.

A property located in a location with a low economy and low population will have low demands. This will affect the value of such property. Commercial properties have better value and generate more profits in urban areas compared to residential properties.

  1. Analyze comparable properties

You must first compare the property with other recently sold similar properties before buying and selling a property. This is to help you determine the current market value of the property.

To determine the current value of the property you want to buy, search for a similar property that the square footage is not higher or low than 10% of the property you want to buy. Doing this, you will come up with the most accurate comparable value for the property.

  1. Use the right success metric

You need to understand real estate finance and investing. There are a lot of calculations and formulas involved in real estate finance and investing. These include:

  • Net Operating Income – The net operating income equals all revenue and costs from a property. This calculates the amount investors will make from an investment after removing all operational expenses. This is calculated before payment of taxes.
  • Cash On Cash – This is a calculation that shows investors the rate of return on a commercial real estate investment. Real estate investors that rely on financing to purchase their properties commonly use this. It measures the returns on out-of-pocket cash or the personal cash invested relative to the return on the part that was financed. It provides an accurate analysis of an investment’s performance.
  • Cap Rate – The cap rate or capitalization rate is used to calculate the value of income-producing properties. It is the ration of the net operating income to a property asset value. It provides investors with an estimate of future cash flows or profits from an investment. 
  1. Avoid mistakes and mitigate risks

As a commercial real estate investor, it is very important that you avoid making mistakes and mitigate risk. Mitigating risk is the greatest asset of a commercial real estate investor. If you do not know all you need to know to avoid mistakes, you may end up losing and failing.

What are the common mistakes a commercial real estate investor should avoid?

They include:

  • Financial ignorance – Financial ignorance is failing to understand the financial intricacies of commercial real estate investment. As a commercial real estate investor, you need to learn all the financial components of commercial real estate investments.
  • Improper Valuations – As a commercial real estate investor, you need to be able to evaluate and account for variances in each property. If you do not know how to make proper valuations of the properties you want to buy, you may end up going into a great loss.
  • Neglecting due diligence – As a real estate investor, you should always mind due diligence. You need to take adequate time to learn much about a property before investing in it.
  • Not working with a team – It is wrong for a real estate investor to work alone. Working with a team is essential in order to get the best professional advice and services. Hire a team of qualified professionals who are knowledgeable in commercial real estate investment.

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Commercial Real Estate Investment in Dallas, Texas 2019

Commercial Real Estate Investment in Dallas, Texas

Real estate investors are constantly looking for the best investment opportunities. Investing in the right properties and the right location will yield more profits. There are different kinds of properties that you can invest in as an investor. If you are looking to invest in properties that will yield you good financial rewards, Commercial Real Estate Investment in Dallas. 

Investing in commercial properties will yield more profits than investing in residential properties. However, you need to make adequate research and seek the services of commercial real estate professionals. This is because commercial properties are high-risk, high-reward real estate investments.

What is Commercial Real Estate?

Commercial real estate (CRE) refers to buildings or lands used exclusively for business purposes for the aim of generating profits. Any building or land used exclusively for business purpose and generating profit is known as a commercial building. Profits are generated from commercial properties by selling or leasing the properties. They are either sold or rented out to business owners who want to use the properties for business purposes.

Commercial real estate includes office buildings, medical buildings, hotels, shopping centers, farmlands, retail stores, malls, warehouses, restaurants, garages, gas station buildings, and departmental stores.

Investing in Commercial Real Estate Dallas

Investing in commercial real estate is a high-risk, high-reward investment. As an investor, you can make money through property appreciation and rental increments. The management and maintenance of a commercial property is the responsibility of the tenant, hence you don’t incur more expenses in managing and maintaining the property.

You can invest and own a commercial property through two ways which include:

  • Direct Investment

 

This is a way to own a commercial property by investing directly towards the ownership of the physical property. It simply means purchasing a commercial property directly. 

To be able to purchase a commercial property directly, you need to be a high-net-worth individual. This is because you need a considerable amount of capital to invest directly and own a commercial property.

Investing directly in commercial properties in Dallas could require a considerable amount of capital. However, it is a wise investment risk to take because you will be making good profits from your investments due to its high economic growth, high employment rate, and ever-increasing population.

  • Indirect Investment

 

Indirect investment means investing in commercial properties indirectly through various market securities such as exchange-traded funds, real estate investment trusts, or investing in companies that finance commercial real estates markets such as banks and realtors. 

Indirect investment means you are part-owner of the property and enjoys a part of the profits made from the property.

Advantages and benefits of investing in commercial real estates in Dallas

Investing in commercial properties in Dallas has many benefits and advantages. These include:

  • Increased profits

 

Making profits is the sole aim of investing in commercial real estates. When compared to investing in residential properties, the annual return of commercial properties is about 12% while the annual return of residential properties is about 6%.

The leasing rates of commercial properties is significantly higher than the residential properties. Dallas is a populated city with a good economy. Businesses are experiencing drastic growth in Dallas and commercial property owners are smiling to the bank due to high rentals. Commercial real estates have good returns and considerable monthly cash flows.

  • Longer lease contracts

 

Commercial properties generally have a longer-leasing contract compared to residential properties. A leasing contract for a commercial property could be up to 5 years or more while a leasing contract for the residential property could be for 1 or 2 years. 

The long leasing contract generates more cash which you can reinvest in purchasing another property.

  • Property appreciation

 

Commercial properties are always appreciating. Business owners are constantly looking for commercial properties to rent, hence increasing the demand for commercial properties. The increase in demand leads to the appreciation of the property which in turn leads to increment in rentals. Commercial property will continually increase in value.

  • The maintenance and care of the property is the responsibility of the tenant

 

The tenant doing business in a commercial property is most often the one maintaining and taking care of the property. This means you do not spend your money on maintaining the property. The tenants are in charge of maintaining the property and keep it in good condition to keep their business running and their customers happy.

Why investing in Dallas commercial real estate market is a good investment

An expanding population, pro-business environment, increased economic growth, and some other good reasons are luring investors to invest in Dallas commercial real estate market.

A survey conducted by NYSE ranked Dallas-Fort Worth as second in the U.S for real estate investor’s interest. Dallas commercial real estate market attracts both domestic and foreign investors with Canadian investors particularly interested.

The Canadian investors have invested a large amount of over $326.2 million in the Dallas-Fort Worth real estate market over the past 12 months and this is estimated to go higher.

Germans and South Korean investors are also trooping into the Dallas commercial real estate market. 

One of the strong reasons why Dallas is a lucrative ground for commercial real estate investment is its high employment rate and economic growth. A strong economic lead to rental increment as the demand for the property keeps increasing.

Businesses and organizations make good profits due to good economy and high employment rates. The people living in Dallas can comfortably afford their basic needs and buy whatever they want from these businesses. A business will not grow when the people around don’t have money to patronize the business. Hence, the high employment rate and availability of good jobs also make Dallas a lucrative ground for commercial real estate investors.

Dallas-Fort Worth is a dynamic region where no one industry dominates and growth projections are generally higher than other large U.S. Due to its diverse economy, the city is much more insulated against unforeseen macroeconomic events which might cause stronger economic headwinds in other States.

Nationally, industrial real estate is attracting the most investor interest, with 50 percent citing it as their preferred investment opportunity. Multifamily real estate follows at 20 percent, office at 14 percent and retail at 10 percent.

Along with investments, the region’s real estate scene continues to expand. CBRE reported it’s tracking more than 5.6 million square feet and 15 million square feet in current active tenant requirements for office and industrial space, respectively.

That’s an indicator that Dallas-Fort Worth will remain an attractive investment opportunity.

Dallas has remained on top of the list for the top real estate investment market for years. Dallas was ranked 12th after cities like New York, London, Paris, and Tokyo in JLL’s 2016 investment market survey.

Dallas city is comprised of high-tech and high-value sectors with good infrastructure and transparent business practices that all combine to make the city a robust commercial real estate market.

Commercial real estate market Data in Dallas-Fort Worth area 2019

The population of Dallas-Fort Worth is about 7.4 million, making the cities two of the fastest-growing cities in the U.S. The Urban Land Institute recently named the Dallas-Fort Worth area like the top real estate market in the U.S. This recognition was given for both commercial and residential real estate market.

Top business sectors in the Dallas-Fort Worth area reported employment growth over the years, especially in transportation, utilities, professional and business services. 

Below are the following Market data highlights from Q2 2019 Dallas-Fort Worth MarketView reports from CBRE:

Multifamily rental homes

 

  • Rentals grew 3% year-over-year as demands exceed supply
  • The net absorption in Q2 2019 is the highest that the market has experienced in 30 years.
  • The annual delivery in multifamily homes is exceeding annual starts, while the single-family development is declining simultaneously.

 

Office buildings

 

  • The gross asking rentals increased overall from $25.01 per sq. ft. to $25.26 per sq. ft. between Q1 and Q2 2019. Also, Class A asking rentals rose from $30.95 per sq. ft. to $31.37 per sq. ft.
  • Over the most recent quarter, vacancy remained flat.
  • The net absorption of office spaces slightly declined within the Q1 and Q2 2019.
  • 4.3 million sq. ft. of office constructions are currently ongoing and 46% of the offices are already pre-leased. 

 

Retail stores

 

  • Occupancy of retail stores reached a record high of 94.7% in Q2 2019
  • Retail construction and absorption both increased during Q2 2019.
  • The Collin Creek $1 billion redevelopment project has been approved by the planning and zoning commission in the DFW suburb of Plano. This is a mixed-use project including a hotel, 500 homes, 2,300 apartments, 300 senior living units, and 300,000 sq. ft. of retail space.

How to get started in commercial real estate

Do you want to invest in commercial real estate but you don’t know how to start? Here, we are going to show you how to get started and invest in commercial real estate. To ensure success and going into investment loss, you must first do your homework and thorough research. You must know the ins and outs, dos and don’ts of commercial real estate.

Below are some vital tips you need to follow for a successful commercial real estate investment:

 

  • Understand how commercial real estate is different from others

 

Commercial real estate is different from residential real estate. The income from commercial real estate is typically usable resulting from longer leasing period. A commercial real estate investor has better potentials and opportunities to earn a higher income than a residential real estate investor.

The location of the property and the type of tenant also has a great role to play in determining the demand for the property. A property located in a location with the low economy and low population will have a low demand. This will affect the value of such property. Also, commercial properties have better performance and value in urban areas compared to residential properties.

 

  • Analyze comparable properties

 

Before buying or selling a property, you must first compare the property with other recently sold similar properties. This is to help you determine the current market value of the property. To determine the current value of the property you want to buy, search for a similar property that the square footage is not higher or low than 10% of the property you want to buy. Doing this, you will come up with the most accurate comparable value for the property.

 

  • Use the right success metric

 

As a commercial real estate investor, you need to understand real estate finance and investing. Real estate finance and investing involve a lot of calculations and formulas. These include:

  • Net Operating Income 

    The net operating income equals all revenue and costs from a property. This calculates the amount investors will make from an investment after removing all operational expenses. This is calculated before payment of taxes.

  • Cash On Cash 

    This is a calculation that shows investors the rate of return on a commercial real estate investment. Real estate investors that rely on financing to purchase their properties commonly uses this. It measures the returns on out-of-pocket cash or the personal cash invested relative to the return on the part that was financed. It provides an accurate analysis of an investment’s performance.

  • Cap Rate 

    The cap rate or capitalization rate is used to calculate the value of income-producing properties. It is the ration of the net operating income to a property asset value. It provides investors with an estimate of future cash flows or profits from an investment.

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10 Habits of Successful and Effective Real Estate Investors (2019 Update)

No real estate investor intentionally sets out to be mediocre. No one wakes up and says, “You know, I really just think I’m not going to try today”. However, the fact remains that some real estate investors are much more successful than others. How does that happen? It really comes down to having the right habits, and being able to act on knowledge of the real estate market. What are the habits of the most successful real estate investors? Let’s take a quick look.

Investment Plan

Highly successful real estate investors always have a plan. They never fly by the seat of their pants. They realize that being unprepared in this industry is the same thing as being uninformed. You’ll need to have a plan that details how you’ll reach your short-term goals, as well as your long-term goals. Of course, that means you need to identify what those goals are before you start investing.

Market Knowledge

The most successful real estate investors have in-depth knowledge of the real estate markets in which they invest. While they might be active in more than one market, they take the time needed before getting into the market to understand the various drivers of the underlying economy, the shifts in the real estate industry and more. You cannot afford to invest in real estate if you’re unwilling to take the time to build that same level of knowledge yourself.

Honesty and Integrity

There’s no codified set of ethics that real estate investors must adhere to, but that doesn’t change the fact that the most successful investors are honest and act ethically. They’re upfront and take care of their reputation. They understand that a reputation for lacking integrity, dishonesty or unethical actions and decisions can cripple their efforts.

They Specialize

It’s tempting to think that most successful real estate investors are all over the board. It’s true that some of them are, but you’ll find most of the really successful ones specialize in a particular area. This allows them to build very deep knowledge about the area and then exploit that knowledge to make savvy investments that really perform over their preferred timeline. Think of this as apprenticeship training – you master one area, and then move on to another, eventually mastering most or even all areas.

Respectful

While you might think that real estate investing is about money, or real property, it’s actually about people. The most successful investors understand this intrinsically, and treat everyone with respect, from renters to business partners. They also understand that being respectful is the best way to gain referrals, which are responsible for a large percentage of their financial success.

They’re In the Know

The notion that you’re done with education when you get out of school needs to be eliminated. The most successful real estate investors are committed lifelong learners, and are willing to stay in the know about pretty much anything that will affect their markets, their investments or the real estate industry itself as a whole. This refers to everything from laws and regulations to shifts in political power to buying and selling trends for individual neighborhoods.

Knowledge of the Risks

While real estate investing doesn’t carry the same risks as playing the stock market, there are risks involved. Savvy investors not only understand those risks, but also know their own risk tolerance and tailor their investments toward those elements.

They Don’t Go It Alone

No investor is an island, and the most successful of them build a team to support their efforts. This includes a professional, reputable accountant who can help them handle the sometimes very complex taxation matters that go hand in hand with real estate. They also network with others, develop contacts with attorneys, form relationships with mentors and business partners, and more.

Now that you know more about the habits of the most successful real estate investors, you can begin to make progress toward securing your own financial future.

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How Your Investment Portfolio Could Benefit from Commercial Real Estate (2019 Update)

There is savvy in diversity. This is true in almost any setting imaginable. Diversify in your crops and your yields are greater. Use diversity in your diet and enjoy greater health. Diversify in your investments and you have a more solid strategy. In fact, almost any investment portfolio is going to benefit from diversity, and this should include incorporating commercial real estate into the mix.

While the typical strategy will find investments like bonds, stocks and savings among the most common blend of assets, many also now contain real estate of one kind or another. In fact, as savings rates have fallen to 1% or less in many instances, and stocks or bonds delivering 3% and higher, real estate can deliver an annual return of 9% or more.

Understand the Benefits of Commercial Real Estate Investments

Firstly, it helps to understand just what commercial real estate means. It can be retail property like a single building with a store or shop, but also an entire strip mall or shopping center. It can be an industrial property like a warehouse or factory, an office building of various kinds (including a corporate park), it can be a self-storage facility of any kind, a hotel or motel, and it can also be a multi-family property with apartments or multiple housing units in one building.

Within this broad array of potential assets, investors will enjoy a tremendous amount of stability and security. However, like any investment, you have to perform due diligence and evaluate any investment based on your needs. For example, how much risk can you take? What sort of returns do you need? What are the specific tax issues with one type of investment over another?

Once you understand your goals, you can then better understand how diversifying the portfolio with commercial real estate investments is such a wise choice. The primary benefits that apply to all, include:

High returns – Historically, real estate investments, especially commercial properties can supply a 9.5% return over a twenty year period

Cash flow – Unlike many real estate investments, commercial properties are noted for the dependability of their cash flow. This is a level of security that few investments of any kind provide.

Hard assets – When you own stocks or bonds, you have no hard assets. Real estate is a hard asset at its finest and has specific appeal over paper or electronic holdings.

Taxes – The benefits of properly structured real estate investments are quite substantial. There are benefits on loans and interest paid, there are tax benefits linked to the depreciation of the asset, and much more.

Hedging – It can be tough to hedge your portfolio against loss, but real property is a fantastic hedge against issues like inflation. Commercial real estate is long known for gaining during inflation, helping to maintain the value of the portfolio over the long term.

Diversity – As noted, smart investors diversify. Commercial real estate is not linked in any direct way to the stock markets, making it a great hedge. They also provide a wide range of types and options, with a wide array of prices and investment sizes available, making them suitable to almost any portfolio.

Influential – Unlike any other sort of investment, the owner of commercial real estate investments can actually influence their performance in the portfolio. This can be done by taking any steps you have available to increase the value of the property or otherwise influence its performance. You might “re-tenant” a building with higher quality clientele. You might make improvements that instantly increase the value and equity of a property. In no other way do investors ever have such control over their investment vehicles.

So, if you are looking for a good way to improve your portfolio in the North Dallas, University Park, Preston Hollow, Frisco or Plano areas, consider the many options for commercial real estate investments.

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5 Trends in Commercial Real Estate You Need to Watch in 2019 (2019 Update)

Anyone interested in getting into the commercial real estate game needs to understand that emerging trends can have a major impact on your investing activities and the amount of success you enjoy (or don’t, as the case may be). Whether you’re a seasoned investor or you’re just getting into the act, here are five of the most important trends for 2019 that you need to watch.

Changing Regulations

It’s not just a new year, but the start of a new presidency. President Trump has already said that he plans to strip down Dodd-Frank and make major changes. Those changes will affect you, either for good or ill. There’s also the possibility that some specific banks will benefit more than others, and if that’s the case, there’s the potential for legal action. Again, this may have no effect on you, but it bears watching.

Less International Competition

It’s no secret that American investors have had to fight it out with international investors for prime real estate in many of the nation’s largest markets. That seems poised to change. In particular, Chinese investment may be lightening. If true, this means that you’ll face less competition, and possibly enjoy better pricing, but that remains to be seen.

Fewer Regulations

Tying back into Trump’s drive to strip down Dodd-Frank, you may see fewer regulations in the investment world. The immediate upshot of this may be that you have an easier time securing financing for your real estate investments. With fewer regulations, banks are able to be freer with their capital, but this may also come with increased risk.

Higher Interest Rates

This one has been a long time coming (and it’s not quite here yet, so things might change), but the Fed is finally set to raise interest rates. They are expected to go up by a quarter of a point. This will affect several things, but most notably the interest rate you pay on commercial real estate loans, as well as lenders’ willingness to make loans in the first place. If they’re able to charge more interest, they may be more willing to take bigger risks. There is also concern about the larger national deficit increasing inflation, which may also have a big impact on interest rates.

Alternative Lending Solutions

Finally, there’s a shift away from traditional bank lending. Part of this is due to the ongoing repercussions of Brexit, which is making UK lenders unappealing options for financing, but also to the rise of non-bank lenders. Crowd sourced financing and groups like Blackstone are poised to make a big difference in the commercial real estate industry, so pay attention when choosing your options.

These are just a few of the trends that you’ll need to watch in 2017 if you’re considering or already involved with commercial real estate investing. While none of these trends has really changed the landscape just yet, they do have the potential to have significant impacts on any commercial investments, from individual investors to investment groups and everything in between.