16 Common Misconceptions About Buying Commercial Properties

Commercial Real estate Investment involves buying commercial properties that are bigger than a 4 unit apartment building. It really is that real-estate investment by which an estate is rented out or sold to make profit through rental income, interests, dividends, royalties, etc. but not for primary residence. It is better for the investors who are beginners in the field to prevent commercial real-estate investment strategy. Conversely, experience investor can go for for this kind of investment as the competition is much less. It's also the best choice asset class for building wealth, you might ask why? It is because there's a limited supply of land; no more land has been created! If you select a real-estate with a land component within an area of increasing population and demand, the laws of demand and supply shall work within your favour to improve the value of your investment. It provides better leverage than some other asset investment, with the ability to typically borrow at least 80% of the purchase price on house and land packages. 100% lends are possible in certain circumstances. It physically exists and everybody needs a roof over their head. Wherever you will find people, there will be demand for real estate. Given a healthy national economy, no deflation, an increasing population, or at least increasing demand for property in your chosen investment area, then your investment is liable to improve in value over-time. You could have no control over their state of the economy, but I tell you, you may stack the chips within your favour by selecting the right type of property within the right area. Commercial deals take longer than other investments. They take longer to purchase, renovate, and acquire sold. This is not necessarily a bad thing, but something to remember so that you do not get impatient or rush into a bad decision.

Tips to help you succeed in commercial real estate investment

This investment isn't a get rich quick scheme. It takes time as I said earlier to buy, renovate and sell, so you'll need to be patient. Think big and embark on big investment, buy properties at least 10units, bear in mind the more the unit you buy the cheaper they may be per unit. Be well prepared to spend a lot of money at first, fight the temptation to be discouraged by this, always have in your mind that you could overcome this by borrowing from real-estate investment trust or other source as I mentioned in one of my articles. Predictability is necessary in the investment because it follows a cycle which is often predicted, with predictability you may grow. Additionally, it requires consistent and persistent. Learn to analyse properties, know the worth before buying. Before now you suppose to know that commercial real-estate is the business of marketing and finance, so you should be master of finance, find out about mortgages and rate, loan programs that are available. Also you may need to be a skilled problem solver for anything going on within the business field in other to excel in this investment. Finally, remember that this business is not static, it changes in strategy as well as other aspects, so it's important to be updated in the latest information, to do this it is important to continue with your education/training on this.

Thing to look for when buying commercial real estate investment property

Solid Land Component; Aim for an investment where at least 30% of the purchase price is comprises of the land component. House and land, villa units, townhouses, and low apartment buildings can all fit within the bill. Land will be the only limited resource, and that implies value for you. If you buy a unit in a high rise, not only will the value of the building depreciate over time, but what is to stop developers erecting more high-rises and diluting the supply in your market?

Stable or Increasing Population; Invest within an area through an increasing, or at least stable, population base. Avoid towns which are determined by just one industry for the majority of their employment. If the industry folds, so will the tenants.

Transport, Shops and Public Amenities; Invest within an area close to schools, shops, public transit and good public amenities for example a postal office, library and park lands. Those are the basic factors which make an area desirable to are living in and may help to make certain continued interest in property in that area over the long time.

Affordable for the average Worker; Select a median property in a median area, one which is affordable for the regular workers. High-end real estate is prone to vacancy and busts in recessionary times. Low end real estate is less desirable, can attract a lower quality of tenant, and cost you more in maintenance. Aim for a property that may rent for no more than 40% of the average household income for that area, preferably 30% of the household income.

Affordability for you, the investor; Try to invest in property that at least pays for itself, that's to claim that the rental income will at least cover your mortgage repayments, coverage, upkeep, management fees, local rates and taxes. If this is not possible in your area, consider alternative areas. Otherwise you may still build wealth with negative geared property.

Above are few tips on the way to succeed and buy a good investment properties. Just bear them in your mind when purchasing commercial real estate properties and site I bet you, you cash flow will boom.