Are you intimidated by the thought of buying a commercial property? Well what I am about to share about commercial estate is no more complicated than buying a single family home. Are you thinking that you need lots and lots of cash and perfect credit? Not so the case. In real estate investing article I am going to share 7 commercial investng property myths.
There’s no better time than right now to invest in commercial real estate. It’s never too late, no matter where we are in the market. I am thinking of you the single family home investor who wants to take their cash flow and net worth to the next level while writing this investing article. Commercial real estate is your ticket. Let’s go over a few things that you’re going to need to understand first.
Is Investing in Commercial Hard?
I’m going dispel the myth that commercial real estate is difficult. It is not difficult. All you need to do is have access to the internet, have a cell phone, and have the ability to do simple math. There’s no licensing required. There’s no college degree required.
Different Types of Commercial Deals
There are primarily 10 commercial real estate opportunities that exist today:
- Apartment complexes (5+ units)
- Office buildings
- Retail and shopping centers
- Self-storage facilities
- Industrial Properties
- Hotels and motels
- Mobile Home Parks
- Special Purpose Properties
- Commercial REOs
- Commercial Short Sales
Why Should You Become Commercial Real Estate Investor?
I learned from my mentor that when you have a why and it’s clear and it’s powerful, then the how becomes not so difficult. Let me share with you 3 compelling reasons why to become a commercial estate investor.
1 - You’re in Control
You’re going to have 6 controls that you would not have in any other investment. For example, if you were to buy a stock in the company, you would not have these 6 controls. The owner of the company has those 6 controls. I want you to have control of these 6 items by owning commercial real estate.
1 – You control the income by raising rents
2 – You control the expense because you’re calling the shots
3 – You control the asset because you can sell it or refinance whenever you want
4 – You control the debt because you’re the one who arranged financing
5 – You control the management because you hire the property management
6 – You control the insurance by choosing the type and level of insurance desired
You have control of the income, how much income is coming in, how much income is going out on the expenses. You have control of the asset. You want to sell it or refi it. You have the ability to put debt on the property. Management, you have, be able to hire and fire the management at will, and lastly insurance, just in case of loss.
Again, when you buy a stock in the company, you did not have these 6 controls, but in commercial real estate, we have these 6 controls. Why is this so important? It’s important because these 6 controls equal predictability. In this day and age, in this world economy, in this national economy, we all need predictability.
2. You’re Going to Have Life Options.
Commercial real estate affords you life options. Wouldn’t you like to have the option of working less or pursuing a passion without having to worry about the bills or possibly paying cash for your kids’ college. Commercial estate affords you those options.
3. Just (1) Deal
All it takes is one commercial deal to dramatically effect your financial life. Just one commercial deal can benefit you for the rest of your life, including your children’s lives with the tremendous cash flow and residual income payments.
7 Commercial Investing Myths
Myth #1 – You Need to be a Millionaire and Have Good Credit to Get Started
Truth – Master lease techniques is one of the many ways of buying commercial real estate with a reasonable down payment but not involving a bank (no credit required).
Myth #2 – Analyzing the Numbers is too Difficult
Truth – Can you add up rents? Can you add up expenses? Can you use a mortgage calculator? If so, that’s all you need to calculate the most important figures in commercial real estate.
Myth #3 – Property Management is the Key to Success
Truth – Yes, this is a myth! A very important word was left out that would turn this myth into truth: effective. Effective property management is the key to success. Not just any ol’ property manager will work! You’ll learn that 9 out of 10 property managers are no good and how to find and keep the best in the business.
Myth #4 – It’s a Good Idea to Park your Money in a Down Market
Truth – First of all, if you are not a student of investing, then it is wise to park your money in a down market. Never invest in anything you have no knowledge of. But if you have been in the investing game, you know that the best opportunities are around when the market is mostly down. As Warren Buffet quotes, “Buy when there’s blood in the streets!” Actually, there is no bad time to invest – if you’re skilled enough, you’ll have great deals to buy. You’ll discover that the business of commercial
Real estate is a “relationship” business. And so long as there are people, good people, you’ll have good deals!
Myth #5 – All the Good Deals are Gone
Truth – As long as people believe in this myth that just leaves
more commercial investing deals for you and I!
Myth #6 – Investing in Commercial is too Risky
Truth – Never invest in anything you don’t understand. Your next commercial real esate investment deal is only as risky as your level of understanding in whatever you’re investing in. If you have no knowledge of something you want to invest in, then it is risky. Go get the knowledge. Get help. Why would you make the biggest dollar investment of your life without any trusted mentors and advisors to guide you?
Myth #7– I Can’t Invest in Commercial While Having a Full-time Job
Truth – We recommend for you to have a full-time job when you get started so that your cash flow to pay your living expenses is there. As your portfolio grows, you’ll find that your job will start to get in the way of your investing. Although you won’t find a perfect time to leave your job, you’ll know when it’s time. Do the smart thing – have your passive income from your investments at least match your take home pay before planning on leaving your job. Get help from people who have already been there and done that.