If you’ve been a residential investor for any length of time, there’s a good chance the idea to move up into commercial property investing has crossed your mind a time or two. Depending upon the property you choose, it might turn out to be a good or bad decision. One thing is certain, the possibility for exponentially increased profits exists, as does the chance of financial collapse. Real estate expert Dave Lindahl is fond of saying, “It’s no harder to manage 50 units than to manage 5 units.” If that’s the case, then what are you waiting for?
A cohesive plan might be a good idea. Here’s what to consider before making the move to commercial property.
1. Don’t be afraid to think big. The hassle of finding a mortgage is the same for a one unit building as it is for a 10 unit building. So is the task of repair, maintenance, and advertising. If this is the case, why not at least explore how you might be able to move up into larger apartment buildings?
2. Don’t get in a hurry. Larger, multiple unit commercial deals take longer to go through than single family residential. So does renovation, repair, and filling it up with tenants. This isn’t necessarily a bad thing but should be taken into account when you begin the process. Don’t make the mistake of needing positive cash flow from your commercial investment the month after you buy it.
3. Apartments aren’t the only game in town. When a residential investor looks to move up in the world, his first inclination is often to find an apartment building. It’s natural because it is the type of investment he is familiar with, but don’t overlook the possibilities of office space, strip malls, industrial, mobile home parks, and self storage facilities – though, at present, the Commercial Investing Center is not impressed with the majority of choices outside of the last two options and maybe an apartment building.
4. Don’t fear the learning curve. Many residential investors have developed a system, over the course of doing several deals, that works well for them. Don’t be surprised if it doesn’t translate well to a commercial deal. Commercial properties are a beast of a different sort and the odds are high you’re going to have to develop a different system. Don’t hate the idea. Accept that there will be a learning curve and go with the flow.
The preceding isn’t all you need to know about commercial investing but it might be enough to save you from disaster. Just remember it’s all about the deal and you should never, ever pursue one that seems iffy.
The Commercial Investing Center Team
(Flickr / lordsutch)