The game of commercial real estate could be won in many ways, and has provided many individuals a way to make some serious money. As a matter of fact, a large percentage of the worlds millionaires earned their wealth via real estate investment. While nothing is a sure thing, real estate offers numerous opportunities for the savvy investor. Whether you want to create wealth or simply sustain it, there are several methods that you are able to implement to get where you wish to be.
Where should you start?
Let us look at the investment factors involved in commercial real estate.
Commercial Real Estate Step 1: Research.
The first thing you need to understand before you can invest in real estate is an understanding of the characteristics of a real estate transaction. All of the subtleties can be taken care of by an attorney and accountant, who are well-equipped to protect you from fraud and risk. So, step one is finding a real estate attorney, and accountant who can service your requirements. Do not be concerned too much about the price, as this expense will be computed into your return from the investment. You can discover the right property, and engage a mortgage broker before hiring an attorney.
Commercial Real Estate Step 2: Figure out your budget.
How much cash are you able to invest or raise, and what return do you have to produce from that investment to make the investment worthwhile? This issue needs to be determined up front. This amount is purely subjective, and will vary from instance to instance. Some investors will apply a work-backwards strategy that looks for properties with the greatest returns. This is an unfortunate technique in that many deals that offer a good return are passed by in favor of the potential ‘home run.’
Commercial Real Estate Step 3: Determine your specific technique.
Here are the most popular strategies:
A rehab is where you purchase a run-down building that requires lots of attention. You will then provide the necessary elbow grease. When finished, the property is returned to the market, and you produce a tidy profit, mostly from your ‘sweat equity’.
The key to this technique, of course, is to find real estate that are undervalued. Should you overpay, no matter what you do to the property, you’ll lose on the deal. Also, you ought to stay away from real estate that only need superficial enhancements. You will not make a profit if all it needs is a new layer of paint and the yard mowed. Stay with the properties that need the most TLC and you will come out on top.
Buy and Hold:
Probably one of the most common method of commercial property investment is the buy and hold strategy. You buy real estate that is valued at a fair price which will stay in your portfolio for years to come. It could be in your neighborhood, across town, or even in a foreign country. While you hold on to the real estate, the value will continuously rise. At least that’s the principle, because hopefully developments and enhancements are going on all around you. After a few years (or decades) you, the master entrepreneur, sell the asset for millions more than you pay for it. It doesn’t get a whole lot of better than this.
While there’s a whole lot of money to be produced in this type of venture, it can take a long time to mature. This really is great for someone who has a big chunk of money that they wish to sit on for a few years. There is no set time limit as to how long it will take you to win. You basically need to go with your instinct on this one. This strategy can produce an excellent return and it’s a pretty passive source. You don’t truly have to do anything except buy the real estate and wait.
The quick flip usually requires a property struggling with foreclosure or bankruptcy. In this circumstance, a home owner is under duress, and might take a significant cut in the price in order to get out quickly. You then acquire the distressed property and quickly return it to the marketplace. Since you don’t need to sell quickly, the property will get fair market value and you can make thousands of dollars in profit. As with rehabbing property, the key is finding cheap properties that you know are undervalued. If you know the market, you are able to do very well with this type of transaction.
Whichever investment technique you decide on, make certain it’s the correct one for you. Think about all the elements carefully before making your decision. Just remember that you too can be successful in commercial real estate investment.
Commercial Real Estate Step 4: Start the search.
OK. You’re now ready to begin the property search. Though you should look for the greatest returns, if you find a property that meets your return specifications, you ought to send it to a mortgage broker to shop it around, and get you a few quotes for the cost. Don’t worry about wasting their time, as they understand that only 1 out of every six opportunities will close, so they are content to shop your deal around to investors.
As mentioned earlier, the world of commercial real estate can supply a serious income stream to a savvy investor. But as with any investment strategy, it’s not without risk. So that you can maximize gains while minimizing risks, it is suggested that you seek advice from an investment specialist.