We all are considering it and many of us are actually taking action and getting their hands on real estate investment properties. The longer the NEW YORK Stock Deals doesn’t produce desirable returns the more people are you start with real estate investments.
For most people the obvious choice of properties are single family homes. Although you can invest in real estate without having a home, most people follow the experience they rumah selangorku made while purchasing their own home. This is familiar ground and the learning blackberry curve for doing a real estate deal of this type is pretty slim.
Of course there’s a drawback with this approach. The competition is fierce and there are markets where investors are synthetically driving up the cost of the properties while completely disheartening first time home buyers. If this is the case, the burst of the real estate bubble is just a matter of time.
How do you avoid these situations and still successfully invest in real estate? How do you get in front of the competition and be prepared for bad times in real estate investments as well? The only answer I have is commercial real estate.
Why commercial real estate you might ask? Commercial real estate is a solid investment in bad and the good times of the local market. The commercial real estate I’m referring to are variable unit apartment buildings.
Yes you will turn into a landlord and no you don’t have to do the work by yourself. You are the master and not the manager of the apartment building. The cost of owning and managing the building is part of your expenses and will also be covered by the rent income.
Apartment buildings are thought commercial real estate if there are 5 or more units. To make the numbers work you should think about to either own multiple small apartment buildings or you should opt for bigger buildings. This will keep the expense to income proportion at a positive cash flow. Owning rental properties is all about positive cash flow.
With investing in single family homes it is easy to achieve positive cash flow. Even if your rent income doesn’t cover your expenses 100%, the appreciation of your home will contribute to the positive cash flow. With commercial real estate the principles are not the same.
While single family homes are estimated by the value of recent sales of similar homes in your neighborhood, commercial real estate doesn’t like the value appreciation of other buildings. The value of the property is solely based on the rent income. To increase the value of a commercial real estate you need to find a method to increase the rent income. The formula on what this is calculated would be too much for this short article. I listed a few very helpful books where you can find every detail.
What’s another advantage to buy commercial real estate? Commercial real estate financing is very unique of financing a single house. While financing a single house you are susceptible to lenders who want to make sure that you are in the position to pay for the house with your own individual income. Commercial real estate financing is situated in the properties capability to produce positive cash flow and to cover the financing cost.
After reading all these information about commercial real estate you want to go out there and dive into the deals. Not so fast. First, you need to learn as much about real estate as possible. In commercial real estate you’re dealing with professionals. If you find too much as a newbie you will waste these guys’s time and your commercial real estate career ended before it actually started. Second, no commercial real estate lender will lend you hardly any money if you fail to show at least a little bit of real estate investment experience.
What’s the solution to this? Go out there and do one or two single house deals yourself. No matter whether you make huge profits to start off with. Most newbie investors are losing money on their first deal anyway. If you can manage to show positive cash flow with your single house deals you are in front of the pack.