For those who are looking for an excellent way to generate outside income, the commercial real estate industry is a great way to go. Many people have begun to invest in commercial real estate, and since this type of real estate is continually being developed, purchased and sold, it has become an excellent way to invest money for a solid return. Before one becomes involved in the commercial real estate market, it is highly important that they understand the commercial real estate industry and its many surrounding components.
A Basic Definition of Commercial Real Estate:
It is imperative that one understands a basic definition of commercial real estate. Essentially, commercial real estate includes various real estate properties that have the potential to be able to generate outside revenue or even income for the owner. Whether the property has immediate potential for generating income or revenue immediately, or perhaps in the future, it can still be labeled as commercial real estate.
A Desirable Investment:
Commercial real estate is an excellent choice for investors for a variety of different reasons. 1. Commercial investing brings both long term and short term financial benefits. In the short term, commercial real estate can help you bring in a better cash flow from the use of the property, and in the long run the property will only appreciate in value. Key factors here are purchasing right and professional management; which will result in long term benefits should you choose to sell.
2. There is a lot less risk involved with commercial real estate than there is when dealing with other types of real estate such as single family residential properties. If you purchase apartment buildings or a strip mall, the risk of your investment will spread out among those who are renting from you, and even if you lose one of your renters, you still will be making money and seeing a return from your investment.
Commercial Real Estate Properties:
Another positive benefit of commercial real estate is the scope of properties that you can invest in is quite large. Commercial real estate includes various different properties that make excellent investments. As long as the building consists of more than four units, it can be considered a commercial real estate property. Commercial real estate also includes other properties such as strip malls, apartment buildings, RV parks, industrial parks, mobile home parks, and commercial centers.
Jobs within the Commercial Real Estate Industry:
There are a variety of different jobs that are included within the commercial real estate industry, and all of them benefit from this excellent market. The investors have a very important job within the industry, since it is their money that is being used to make the property develop and become prosperous. Builders too have an important job, and many times they work in commercial real estate to build new structures on commercial property such as apartment buildings or shopping malls. The lenders have a very important job, and they work to make sure that investors get the loans and mortgages they may need to be able to purchase commercial real estate properties. Also within the industry are the brokers who represent the owners and deal with the sales and property transfer issues. Last of all, but certainly not least, are the users who actually put the money in the investor’s pocket. These would be tenants of a strip mall for example.
Financing Commercial Real Estate:
If you are planning on get involved in commercial real estate there are a few things to consider. How do you get financing on commercial real estate purchases. While few people can actually just purchase the property with money they already have, most people need to turn to other methods of financing the property. More than likely you are going to need to with with a private or asset based lender. If you take this route there are some things to know process smother.
You will want to make sure that you have a business plan. You need to be able to show the lender why you want the property and how you plan on making it a successful investment. It is also important that you have at least a portion of the money needed for the property saved up so you can show that this is a serious venture and you are ready to make a personal investment in its success. Also helpful is a current appraisal of the property you are considering. This will help show the value of the property to the prospective lender. Having an attorney to help you and to check out legal issues will also be important, and in the end you should always compare several lending offers before making a final decision.
Getting Started There are many ways to get a start in the business of commercial investing. One way is to glean all the information about the business that you can, whether from reading books, searching the internet, or speaking with friends and business colleagues that may have experience in commercial real estate investing. Check the area you live in to get a look at what kind of commercial real estate is available and what the prices are. This will help you begin to get a closer look at the costs and the availability of commercial real estate in your area. Attending zoning and city planning meetings may also give you insights and ideas for getting started as well. This is also a great way to learn who the “players” are.
Lastly, one of the best things you can do is to start building a network of friends and business acquaintances that already have their foot in the door of the commercial market. Find a mentor, learning from their successes and mistakes can help you on your way to becoming a successful commercial real estate investor.
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For more information on starting a career in commercial and residential real estate investing or to learn how to consistently do 5-7 deals each month contact me.