4 Awesome Tips About Buying Commercial Properties From Unlikely Websites
Is commercial real estate investing an even better investment than investing in residential properties? Generally, all of us realize that real estate in general is a good investment vehicle and both residential and commercial properties may be good investments. Either avenue may have a huge effect upon your net worth, but plenty of people think only of residential property once they think of investing in real estate. Although this is obviously the most viable route for some people, commercial property can offer additional benefits the residential model can not offer.
Three Reasons Commercial Investments are better than Residential Deals:
Commercial Real-estate Gives you More Access to More Capital
It's been my experience that it is somewhat simpler to raise larger quantities of capital (under $3M) for a commercial deal than it is to raise $150,000 for a residential deal. As a residential investor your access to capital is limited primarily to traditional financing, hard money lenders, and private money from individual investors. In case you are unable to raise capital from one of these three avenues, in which case you are forced to acquire property in more of a creative manner with owner financing, subject to strategies, lease options, etc. This in itself just isn't a bad thing, but unfortunately you may have to walk away from some good deals that can't be acquired with creative financing techniques.
In commercial real estate it is more common for investors to pool their capital together and syndicate deals, you shall also see that smaller private equity firms and finance companies are more inclined to do joint venture projects and provide the needed capital to accomplish the deal should the deal seems sensible. So as a commercial investor you have the possibility to raise capital for a deal from the exact same sources as residential projects such as: Traditional Financing and Hard-money, but also you might access capital through smaller private equity firms, hedge funds, private REITs, investment groups, as well as the list goes on.
There also seems to be a experience of intrigue and prestige on the subject of investing in commercial deals. Perhaps, due to their state of the current commercial market, it appears investors are trending more toward investing in commercial projects.
Commercial Real estate is Less Competitive
Whenever you think about it from a marketing perspective, most investors target residential property owners, thus making the residential market more competitive. In lots of arenas, from industry news sources, the World-wide-web, all the "We Buy Houses" signs virtually on every street corner, there are a number of marketing tactics targeting residential property owners. If you take the exact same marketing strategies discussed and apply them to commercial real estate, you will probably find you are the ONLY person contacting these commercial property owners in regards to selling their property. Most commercial properties under $5 million usually be too large for most residential investors, yet too small for many institutional investors.
Commercial Real estate allows for "Forced" Appreciation
Residential properties are usually valued based upon other comparable properties that have sold in the area and are similar in features. In the event the "comps" for a 3 bedroom/2 bathroom house in a particular neighborhood is roughly $100,000, then your property is probably going to be worth one hundred thousand dollars. It doesn't matter too much if your target property has additional features, or if perhaps your home is getting $900 a month in rent instead of the house down the road that is only renting for $700 a month. Everything considered, your property will still be valued pretty close to the "comps" of the area.
Alternatively, in commercial real-estate, the valuation of a property is based on the revenue that the property generates. Generally, commercial properties remain subject to the "comps" of the place as it pertains to "How" that revenue is valued with regard to capitalization rates. Nevertheless, the overall premise is the fact that, the better revenue a property generates, the more that property will be worth.
As a result, so that you can "force" the appreciation of your commercial property, you'll need to locate additional ways to increase the revenue that the property generates. A small increase in revenue can boost the value of a property significantly determined by the "Cap Rates" within the area for that sort of commercial real-estate. Unfortunately, with residential real-estate this isn't a choice as you really can't force appreciation. Your property will be valued within simply click the up coming website general range of the market comps.
