Investing in commercial real estate can be the key to making those fantasies come true:
· Creating the wealth that lets you follow your true passion is what awaits you, whether you are an investor, a realtor, or a lender. Commercial real estate will speed you up financially, the best part is once you reach where you no longer worry about the money, you're going to have to develop and explore other parts of your life in addition to making money.
· We refer to that other part of your life as your "Burning Why." What are you interested in doing, being, or creating? Who are you interested in helping? How will you distinguish? This on its own makes this book interesting to dive into this topic we're going to give you an overview right away so that you can better understand what commercial real estate investment is. We will show you the various types of investors to let you know what your options are. If any of you ask if you can do it, you will find the answer to this question in this topic. The figures, the types of properties in which you can invest, and an overview of how funding works are presented in a few pages. Finally, we are going to summarize the risks associated with commercial real estate. Is it worthwhile doing that?
· Commercial property is also a way to build sustainable wealth for the investor. Long-term wealth is an investment that pays off every month. There is also a year-over-year increase in value. Compare that with other types of investments, like equities, where, if you make a monthly payment, you must be careful that the equilibrium does not drop from year to year until the pot is empty. This is not genuine wealth.
· Commercial real estate can offer you a wonderful and rewarding professional career that has no equal. And in addition to being pleasant, commercial property investors are among the best-paid professionals in the country. It is not uncommon for a commercial investor's check on one closing to be equivalent to an engineer's annual salary.
Commercial property is at the heart of its relational activities. For example, big deals, huge fees, and sustainable and fulfilling careers can all be created by your relationships. As you move forward, start looking at all the business properties you see. When you visit the mall, write down the space that is rented. Which properties are not fully rented? Why is there something wrong with this property? Once you realize that each property belongs to an investor, it's hard not to think about owning your commercial properties one day.
When you decide to invest in something, you must take several things into account:
· You consider the reason or incentive to invest, the cost, and the schedule. Well, the same is true of commercial property.
· You can find that you have too many choices just because there are many ways to enjoy this area.
· If you look at the wealthiest investors, you'll see that they all share a common model: They usually started by investing in homes, managing a business, or working in a well-paid profession. The next step is to begin investing in small commercial properties, like apartments and condos. At some point, successful investors all switch to either large trade agreements or land development.
You may fall into either of the two major types of commercial real estate investors. One is investing in cash flow, and the other is investing in long-term ownership. Both make excellent arguments for fantastic wealth creation, and both can do well in an upward or downward market.
Cash flow investor
Cash investors purchase properties to put monthly income in their pockets. And they purchase commercial buildings as you purchase a business. In other words, if you bought a job-ready business, you would do whatever you could to make sure it was profitable, wouldn't you? You would look carefully at the financial records to prove that he could handle himself every month.
The same thing happens with investors. They take every step to ensure they are investing in a property that generates good monthly cash flow. In addition, investors are not relying solely on appreciation to get rich. They know appreciation isn't anything more than a bonus, a gift. If that happens, that's all right. If it's not, then it doesn't matter, because the focus is on income. Cash flow investors know that expecting appreciation is a form of gambling and doesn't make good business sense. Another advantage for liquidity investors that is often neglected is the ability to weather the storm in a depressed market. In down markets, sales are slow, prices go down, and people who would normally buy a home to live in are not buying a house out of fear. That helps investors make more money in a declining marketplace.
Long-term “hold” Investor
Unlike cash flow investors, long-term investors "hold" on to appreciating wealth construction, but they do so in a more conservative way in the real world. They also enjoy the fairness of repaying the loan amount over several years. The investor's long-term goals to keep are simple: They want transactions with a positive side, like the ability to increase value by improving the property's cash flow. For example, some of the wealthiest investors, we know, are our mentors, who are older men who bought their business properties decades ago.
One of them bought a lot, and another bought a condo. Their philosophy was "A good property will always carry a higher value over several years if I wait long enough." It is an overly simple strategy that has yielded great results for many patient investors. Both gentlemen have retained their properties in three distinct market downturns over the years. Both have debt-free properties and have earned millions of dollars since then. In this book, we cover basic strategies such as "buy good real estate and expect" as well as a lot more creative, accelerated enrichment strategies in the event of a rush.
Crunching the numbers
Honestly, the only condition necessary to make calculations is to be able to count to ten with your fingers Any type of revenue-generating property can be analyzed by simply dividing the agreement into three parts:
· Debt (mortgage payment)
The process for determining cash flow for a 30-unit apartment complex is the same as for a single-family home. For example, suppose you bought a three-bedroom and two-bathroom home and rented it for $2,000 a month. As a homeowner, you are responsible for property taxes, insurance, and landscaping. All these expenditures add up to $600 a month. You also pay $1,000 a month in mortgage payments. The tenant pays for all other expenditures. Here's a quick way to determine monthly cash flow:
Income - expenses - debt - cash flow per month
Using the figures from the previous example of a single-family home, the formula in action is as follows:
$2, 000 (income) - $600 (expenses) $1, 000 (debt) $400 (cash flow)
For example, you have 30 two-bedroom units rented for $1,400 per month. That totals $42,000 per month in income. Total expenditures for the 30 dwellings are $18,000 per month (including taxes, insurance, maintenance, and property management fees). The mortgage payment is $16,500 per month. Here's how the formula works for locating monthly cash flow:
$42, 000 (income) - $18, 000 (expenses) $16,500 (debt) $7,500 (cash flow)
This concept applies to both office buildings and commercial centers. Keep in mind that for any property you want to analyze, you must get the income first, the expenses afterward, and the third debt payment. From there, you can find out if the property is making money. In fact, after reviewing the concrete examples we provide, your level of trust should be unbelievably high.
There are two options to invest in real estate:
· You can invest in a property that is "ready to go" without needed repairs, or trouble.
· You can invest in properties that have a lot of problems and require repairs. Business opportunities exist in all cities. Just like you can do with a residential property, you can repair, flip, and take advantage of the commercial property.
Financing a property
Are there differences between getting a mortgage for a single-family home and a neighborhood mall? The answer is yes, of course, but the differences may come as a surprise. Almost everything you need to get a home mortgage is a good credit score and a down payment, and you need to earn enough money to pay your mortgage. When you obtain a loan for a commercial property, obtaining a loan is based on these three main qualifications:
· Does the asset generate sufficient income to cover expenses and mortgage?
· What is the state of the estate? ·
· How solid is the borrower's financial position?