The world of real estate has always seen its share of successful investments. While many people have made substantial amounts of money in every aspect of real estate, commercial real estate is where the money is today. In the current real estate market, the people who are making the big money in real estate own commercial buildings. What does commercial real estate have to offer an investor?
Let's consider the big difference between commercial buildings and homes. When you lease out a commercial building you can expect to get several thousand dollars per month in rent. When you lease out a home, you might get one or two thousand dollars at the most. This means that you will get a vastly higher amount of cash flow from a commercial property.
In any type of investment, cash flow is of premium importance. The more cash flow that you have coming in, the more flexibility you will be afforded. You can afford to make other investments and multiply your profit even more. With a residential property, you'll be lucky to make the mortgage payment every month with the rent.
Commercial properties also offer the investor appreciation in their investment. Besides the potentially large cash flow up front, you stand to make a substantial appreciation on the back end as well. This means that when you sell the property or refinance it, you will often realize a large profit from the appreciation. Even in today's real estate market, most commercial real estate is appreciating at least a little. When you're dealing with big numbers like most commercial investments require, the potential profit from appreciation adds up fast. Two percent appreciation on a $1,000,000 building will grow much faster than two percent on a $100,000 house.
These two simple facts mean that commercial real estate is good for long-term and short-term investing. If you're planning on investing for several years, commercial real estate can offer you a great deal of appreciation for profit upon sale. Even if you only want to invest for a short-term period, the cash flow will be hard to pass up.
Typically in investing you have two types of investments that you can undertake. You have value-driven and value-added investments. You can either decide to pay the price for a premium property with the high traffic count, or you can buy the fixer upper. Either one could be a great investment under the right circumstances. You have to decide which one you would like to invest in and make sure that it is the right situation for you. If you want a quick cash flow, a fixer-upper probably isn't the right investment for you. If you don't mind spending some money upfront, you have more options.
A competent mortgage broker can help you in your decision and refer you to the right attorney as well. With the help of a team of professionals you will make a much more informed decision. When it comes down to investing your money, you want to make sure that you'll make the most return possible. Investing in commercial real estate can do exactly that.
About The Author: James Janel is the Executive Director of the National Association of Commercial Real Estate Property Scouts. He is a Professional Property Scout, as well as an experienced commercial real estate investor. To find out more about property scouting and real estate investing, or to request our free report, Prospecting for Profits: Turning Dirt into Cash, go to http://www.NACREPS.org.
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