Patience and perspective are necessary when looking to get involved with commercial real estate. You need to be willing to invest not only your money, but both your time and effort. You need to develop the right relationships and find the right type of investment for you.
Most real estate investors get started buying single-family houses, since they’re the most familiar. Whether you’re going straight to big time properties or larger houses, there are some key strategies of success.
If buying a 5-unit apartment requires you to get commercial financing, which is more of a hassle, then why bother? I would recommend Dave Lindahl has been quoted as saying, “It’s no harder to manage 50 units than it is 10.”Buy properties with at least 10 units, the more units you buy, the cheaper they are per unit. Don’t waste your time with small apartments that require commercial financing when you can go big and get commercial financing for a property that will make you ten times more profit. Think Big!
When you’re making a commercial deal you need to realize it will take a lot more time than buying or investing in a regular house, be aware of this, be patient, and don’t rush the process! Bigger properties take time to renovate, purchase, and sell. Don’t be haste and make poor decisions, wait for the right opportunity at the right time and you will see more profit in the end. It’s not a race!
Don’t always go straight after apartment investments. Most people go straight for these properties because they are easy and convenient. However, considering other commercial property like office buildings, industrial, mobile home parks, land etc. can help you find even better success for yourself. Don’t make quick decisions or overlook your options, take the time and use your resources to find the property that will help you reach your investment goals.
Don’t be discouraged if your first deal takes a while, or if one of your deals is taking longer than usual. Houses are easier to sell quicker since they are all similar. Commercial investing takes a lot more research time and effort to find and make the best deal.
There are lots of formulas when it comes to investing. Become familiar with the formulas for commercial investing such as Net Operating Income and Cap rates. Being familiar with these formulas will help you during the process when making offers.
A lot of commercial properties are not listed online so making personal relationships will help you find more deals in your area. Also, the financing of commercial real estate is not normally done alone so having partners and relationships with people you can rely on, who you can work with, and trust will help you in the investment process. The better your networking, the better the deal you will get.
Down payments on commercial loans are usually higher than other types of loans, which can be a burden. However, on the good side, this means that you have less liability of something with the deal goes wrong and providers are more agreeable to you borrowing elsewhere. Regardless, understanding the finances and knowing the best lenders in your area may make the difference between you qualifying for a loan or not.
These tips won’t promise you instant success, but using them you will have the right perspective going into commercial real estate investment, preparing you for success. Starting off on the right foot and being prepared will help you during the process of commercial real estate investing.