The Benefits of Investing in Commercial Real Estate

As a commercial investor, there are many perks that come with the job.

We’ll discuss a few in this post:

Safety Net – Since many commercial properties offer the opportunity to lease more than one units at a time, the chances of entire vacancy are slim. Compare this scenario to renting a single-family home. If the tenant defaults, the cash flow is dried up by 100%. On the other hand, only a percentage of cash flow will be eliminated when this happens for one or more units in a commercial property.

Think of the scenario as how most people perceive employment. With shaky levels of job security in tow, many people are just a pay check away from financial catastrophe. However, if there are other revenues of income set up prior to this, being laid off will be non-issue for some time. In fact, having another income stream is the main reason investors take on commercial real estate.

Higher Payouts – More units rented mean more cash flow for owners.

Stability – The average lease term for commercial spaces is longer than residential units. Some can even extend close to ten years. Small and large startups have one need in common: and that’s a central place to conduct business. As such, many will be reluctant to move, having done business in the same place for years.

Subsidized Taxes – Depending on the lease drafted by a lawyer, many commercial owners have the option to include property taxes as part of the renter’s payment commitment. This isn’t uncommon at all.

Despite these benefits, commercial investors should still be careful. Owning and managing commercial property doesn’t obliterate all risks of investing. Mismanagement, failure to keep tabs, not choosing the right property, and more can all snowball into a disaster.

Check out Jason Hartman’s tips for investing wisely. Prices are usually calculated based on square footage, wherein these can be estimated through market comparisons. For investors who choose the path of commercial real estate, networking is key.

Maintenance is also essential, even during vacancies. Be sure to dot your Is and cross all Ts in a commercial lease. This is recommended to prevent liability in case of accidents, defaults or other incidences – which will be discussed in future posts.

The startup cost for investing in commercial real estate will certainly be higher than a single family home. However, the rewards are well worth the efforts exerted during the initial stages of investing. (Top image: Flickr | Mrshife)

The Commercial Investing Center Team

Investing in Single Family Homes vs. Plexes

As a commercial real estate investor, how can purchasing duplexes, triplexes or quads benefit you? For starters, newcomers can reside in one of the homes, while still earning cash flow from the other units leased. While most investors tend to shy away from living too close to tenants, setting boundaries can streamline how operations are managed. For instance, hiring an on-call repairman and delegating his or her number to renters is one way of deterring the trap of waking up at forbidden hours for maintenance.

Otherwise, all the units can be rented out to multiple families, for multiple income streams.

In choosing the type of commercial property to invest in, it all boils down to what can be afforded at the time of purchase. The bigger divisions of property however, the bigger the returns on investment will be.

How do plexes differ from single family homes in terms of investing? Well, a single family home is easier to buy, because chances are it’ll cost less. By exerting a little more effort into capital investments however, the rewards should be larger with collective payments each month. In addition, when someone buys and holds an investment property, payments can be made to the lender; savings can be maximized year after year; and the capital of multiplex real estate can be reserved for more profitable sales in the future.

History has proven that land and real estate appreciates over time, despite what critics claim. There are instances where neighboring properties and other factors will affect the value of the property but by choosing the right environment, real estate properties are sound investments whether single family homes or multiplexes.

Real estate ultimately secures a steady income and serves as a way of building wealth, even if you don’t have hundreds of thousands to begin with.

New investors should focus on:

Getting Credit Reports in Order: In order to earn startup approvals and mortgages, the better the credit, the better the rate of interest. Jason Hartman also discusses using as little personal capital as possible. The revenue from tenant payments when priced right, should provide sufficient income to repay loans on-time and reserve extra to build money wealth.

Saving for Down Payments: This serves as the initial investment, which can be regained after renting the duplex, triplex or quad following a few years, or even months at times.

Analyzing the Market: Ensure that you delve into the 10 Commandments Of Successful Investing with Jason Hartman, to avoid common pitfalls that new investors make.

Once these orders of business are set, the stepping stones to wealth will be firmly rooted on the ground for successful real estate investing. (Top image: Flickr | tonyhall)

The Commercial Investing Center Team

3 Reasons to Invest in Mobile Home Parks

Mobile home parks are a hidden investment opportunity compared to other commercial real estate. This is because it isn’t as widely advertised.

Let’s examine three reasons to invest in mobile home parks from the long-term cash flow angle:

1.Low Rent – Americans have downgraded their homes and lifestyles due to the recession and other factors. The low rents in mobile home parks make it appealing to renters. How does low rent boost profit margins? By calculating the total revenue of all the homes within the park, as well as the land space, the figures add up to a significant amount. Experts agree that pricing rent low contributes to sustained high-demand.

2.Low Supply and High Demand – There are over 50,000 mobile home parks within the United States. In addition, construction of new mobile homes are somewhat at a standstill. This means that old and available supplies are met with high demand.

3.Success Rates – One of the best ways to become financially successful is to gain the wisdom of those who have already accomplished the feat. Warren Buffet, unlike Donald Trump, is reportedly the biggest investor in mobile home parks, whereas Donald Trump invests in luxury real estate. Which market do you think is easier to tap into? Another Fortune 500 maven, Sam Zell, made his riches through mobile home park investments. Average men and women also have the opportunity to succeed in this market through due diligence research.

Despite these appealing factors, investors will need to exercise business savvy to get a good return on investment.

Jason Hartman advises:

  • Buying in a Central Location – This key tip is the difference between having a large vacancy or full occupancy.
  • Keeping Prices Reasonable – A low-price strategy contributes to long-term clients. Consider this: What would make a consumer remain in a mobile home park if they were able to relocate to a bigger home for the same price? The key to keeping mobile home park renters is low rates.
  • Cutting Expenses – Despite keeping rental prices low to secure a low-income target market of renters, mobile home park owners should additionally seek ways to reduce expenses on their end. A good example is researching the most affordable utility companies in the area, verses sticking with the most popular service provider.
  • Securing Insurance – In the event of a natural disaster, make sure you’re covered. In the same breath, ensure that the location is one that isn’t prone to hurricanes or a popular route for natural disasters.
  • Cooking Up An Exit Strategy – For mobile park owners who are not satisfied with the investment, the alternative would be to sell for a tasty profit.

Ultimately, lucrative mobile home park investing boils down to accessibility for the target market in terms of low price and convenience to the metropolis. (Top image: Flickr | KOMUnews)

The Commercial Investing Center Team