When it comes to investing in real estate, the profits can be massive and long-lasting… IF you know what you’re doing.
If you don’t know what you’re doing, you either need luck or somebody with experience to guide you.
Now, I wish I could personally help each and every student, but I just don’t have enough time on my hands (unless you’re in a special group of students).
That’s why I’ve put together this beginner-friendly Property Profit Multiplier that you can start using ASAP!
In the beginning of your real estate career, you’ll soon come across one question:
Residential or Commercial?
Residential can often seem tempting since most individuals have at least a little experience in that area, considering we all need somewhere to live.
However, if you can step outside of your comfort zone and consider a commercial property, your profits can be multiplied MASSIVELY.
To begin, yield is usually higher per square foot in commercial properties when compared to residential.
In general, commercial properties have an annual return of around 6% to 12%, which is far higher than the average annual return of a residential property.
Another advantage to investing in commercial real estate versus residential is the relationship between landlord and tenant.
In commercial real estate, your tenants are actual businesses, which allows for much more professional interactions between you and your tenants.
This is also a positive considering business owners will want to keep their property presentable, so your investment will be much better taken care of than if you were leasing out apartments, where people are doing who knows what to their homes.
Leasing commercial spaces also means there is limited hours of operation, since businesses close at the end of the day and workers go home.
This means there are less hours in the day that you have to wear that landlord hat, and you won’t have to worry about phone calls from your lessees in the middle of the night like residential landlords do.
Something to keep in mind when making the jump to commercial real estate investing is that everything takes a little longer.
Reviewing properties and due diligence can take months compared with the days it takes in residential real estate.
Finding tenants for commercial properties can also take a bit longer.
However, despite those inconveniences, the leases are also longer when compared to those in residential real estate, so once you find that perfect lessee, you won’t have to worry about finding another for years.
So, if you’re convinced to take that leap and multiply your property profits, here are some helpful tips when getting started.
First off, find out what the time frame is for all necessary city approvals. It can take months to sometimes years to receive a building permit, and you’ll want to know that before you purchase a property.
You also need to consider area demographics and trends, and make sure that there will be businesses wanting to rent your space once everything is up and running.
Once you’ve bought the property and everything has been approved, you need to find good lessees (if they’re not occupying space in the property already).
While you may not know ahead of time what makes a good lessee in commercial real estate, I can help you know which potential businesses you should avoid renting to.
Any failing businesses or businesses in declining industries should be avoided.
In the case of restaurants, grocery stores, and bars, you can assume they will likely default on their lease at some point, and you should be prepared for that possibility.
Ideally, it would be better to avoid that headache all together, and not lease to such businesses.
Real estate is a lucrative investment, and commercial real estate in particular can deliver HUGE returns without forcing you to work alternate hours.
That’s why you should consider real estate to multiply your property profits, whether you’re a beginner or a veteran of the game.