15,99 €
Mehr erfahren.
- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
Make real estate part of your investing strategy! Thinking about becoming a commercial real estate investor? Commercial Real Estate Investing For Dummies covers the entire process, offering practical advice on negotiation and closing win-win deals and maximizing profit. From office buildings to shopping centers to apartment buildings, it helps you pick the right properties at the right time for the right price. Yes, there is a fun and easy way to break into commercial real estate, and this is it. This comprehensive handbook has it all. You'll learn how to find great properties, size up sellers, finance your investments, protect your assets, and increase your property's value. You'll discover the upsides and downsides of the various types of investments, learn the five biggest myths of commercial real estate investment, find out how to recession-proof your investment portfolio, and more. Discover how to: * Get leads on commercial property investments * Determine what a property is worth * Find the right financing for you * Handle inspections and fix problems * Make big money in land development * Manage your properties or hire a pro * Exploit the tax advantages of commercial real estate * Find out what offer a seller really-really wants * Perform due diligence before you make a deal * Raise capital by forming partnerships Investing in commercial property can make you rich in any economy. Get Commercial Real Estate For Dummies, and find out how.
Sie lesen das E-Book in den Legimi-Apps auf:
Seitenzahl: 658
Veröffentlichungsjahr: 2011
Ähnliche
Commercial Real Estate Investing For Dummies®
by Peter Conti and Peter Harris
Commercial Real Estate Investing For Dummies®
Published byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.com
Copyright © 2008 by Wiley Publishing, Inc., Indianapolis, Indiana
Published by Wiley Publishing, Inc., Indianapolis, Indiana
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600. Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing, Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at http://www.wiley.com/go/permissions.
Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendor mentioned in this book.
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional person should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Website is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Website may provide or recommendations it may make. Further, readers should be aware that Internet Websites listed in this work may have changed or disappeared between when this work was written and when it is read.
For general information on our other products and services, please contact our Customer Care Department within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.
For technical support, please visit www.wiley.com/techsupport.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.
Library of Congress Control Number: 2007941165
ISBN: 978-0-470-17491-3
Manufactured in the United States of America
10 9 8 7 6 5 4 3 2 1
About the Authors
Peter Conti and Peter Harris are known as the World’s #1 Greatest Commercial Real Estate Mentors. They partnered years ago by combining their existing Mentoring practices. They have both started from modest beginnings, Peter Conti was an auto mechanic, and Peter Harris was an introverted engineer. The portfolio of properties they have purchased nationwide with their Commercial Mentoring Program students continues to grow at an accelerated rate.
Peter Conti is the CEO of MentorFinancialGroup.com and lives on the Chesapeake Bay with his wife and kids in Annapolis, Maryland.
Peter Harris has purchased and put together commercial and residential real estate deals across the country for years. He has taught, mentored, and instructed many of the most successful investors across the nation. Harris and Donald Trump are coauthors of Three Master Secrets of Real Estate Success. He also sits on the board of advisors on several private and national real estate investment and development companies.
Many years ago, Peter Harris received the gift of a great mentor in his career and in his every day life, who guided and encouraged him to always get out of his comfort zone and play a bigger game. Mentoring one-on-one or to hundreds at a time around the nation is Peter’s way of giving back and imparting the message of hope and faith in the dynamic and rewarding world of real estate. Even though Peter’s first career was a physicist, holding several U.S. patents on outer space simulation, the school of hard knocks was where he got his real education in the business world.
Besides his business life, Peter’s passions include hanging out with his son PJ, serving at his church, smiley faces, and riding his bike hundreds of miles at a time. Peter Harris lives in the heart of San Francisco with his son, PJ.
You can e-mail the authors at [email protected], or you can call them at 800-952-9585.
A Free Gift from the Authors: Your Bonus Commercial Quick Start Training Package
Here’s your chance to join the authors for over six hours of training that just wouldn’t fit in the book so that you can hit the ground running with your commercial real estate investing. You’ll get to listen in, watch, and respond as they guide you in putting together highly profitable commercial deals.
Here’s what you get:
Over 6 hours of audio and video commercial investing training sessions
Special form “Addendum A,” which gives you up to 90 days to decide if you want a deal or not
A Quick Start exclusive: The Money Raising Workshop
Audio interviews with leading commercial real estate investing experts
You’ll discover:
The fastest way to get started investing in commercial real estate
How to retire in five years or less
Insider secrets to finding deals
How to buy commercial real estate with no money
Three steps to quickly fund even the biggest deal
How to explode your net worth with land development
You’ll also receive this special report: “The 3 Best Places to Buy Commercial Property Today”
Get your Commercial Quick Start Training Package (a $299 value) by registering your copy of this book at www.commercialquickstart.com. Enter code CFD101.
Authors’ Acknowledgments
From both authors:
To every one of our Commercial Mentoring Program students. This book, along with all of the fun we’ve had and all of the properties we’ve bought together, would not be possible without you. Your courage motivates us every day. To Tim Gallan and Mike Lewis at Wiley publishing, we don’t know how you do it. Thanks for giving us a little breathing room.
From Peter Harris:
To PJ, for always hanging in there with Dad. You are the greatest son a father could ever ask for. I love you, dude.
To Steve, Gary, Abe, Marge, June, Beck, Lela, Stone, Steph, and wonder boy Kyle, for always cheering for me.
To Da’ Girls, you know who you are! Thanks for being warriors in your lives and mine. I am the wealthiest man on earth because of who and what we share together. The best is yet to come!
From Peter Conti:
This book wouldn’t have happened without the awesome changes I’ve seen in my life over the past few years. Thank you, God, for such a great life and especially for surrounding me with so many wonderful people. Joanna, I love you. I miss you girls. You grew up so fast. Son, our time together is precious to me.
To everyone at MentorFinancialGroup.com: Marilyn, Angela, and Jeff. Wow! You are the most incredible and fun people I’ve ever had the privilege to work with. To Deb, Elizabeth, Kevin, Elaine, and Molly, you are the backbone of the Mentor Family. All of you have proven that nothing is impossible for the man who doesn’t have to make it happen.
To all of our coaches, Peter Harris, Cheryl, Rob, Stephen, Emily, Juli, Cleve, Jeff, Matt, and David. Your daily support and encouragement for our Mentorship students is changing the world.
To Mr. X in one of the southern states. Your passion for helping all of our students to profit from every single deal they do with us is the keystone of the Mentor System. You deserve the credit even though you wish to remain anonymous.
To my friends in Christ: Brett, Rob, Peter, Baden, Tom, Thomas, Stephen, and Robb. Thank you for your leadership and guidance. And Rob, that praying over your wife thing you taught me is awesome!
To Mom, Dad, Lisa, Debbie, Linda, John, Paul, and Matthew, I love you.
Dedication
Peter Conti: This book is dedicated to Peter Harris. You are an incredible blessing in my life.
Peter Harris: I dedicate this book to God first and foremost. I thank Him for His faithfulness, His love and grace, and for all of the amazing people He blesses me with. I also thank my great mentor, a great man named Nick Tsujimoto. Thank you, Nick, for your wisdom and love, for our many “closed door” sessions, and for helping me set and achieve awesomely scary goals. Lastly, I want to thank my partner Peter Conti for being the man and friend that he is and always will be. And to everyone else: The best is yet to come!
Publisher’s Acknowledgments
We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/
Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and Media Development
Senior Project Editor: Tim Gallan
Acquisitions Editor: Michael Lewis
Copy Editor: Jessica Smith
Editorial Manager: Michelle Hacker
Editorial Assistants: Joe Niesen, Leeann Harney, David Lutton
Cartoons: Rich Tennant (www.the5thwave.com)
Composition Services
Project Coordinator: Kristie Rees
Layout and Graphics: Reuben W. Davis, Alissa D. Ellet, Brooke Graczyk, Christine Williams
Anniversary Logo Design: Richard Pacifico
Proofreaders: Cynthia Fields, John Greenough, Bonnie Mikkelson
Indexer: Steve Rath
Special Help Elizabeth Kuball
Publishing and Editorial for Consumer Dummies
Diane Graves Steele, Vice President and Publisher, Consumer Dummies
Joyce Pepple, Acquisitions Director, Consumer Dummies
Kristin A. Cocks, Product Development Director, Consumer Dummies
Michael Spring, Vice President and Publisher, Travel
Kelly Regan, Editorial Director, Travel
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher, Dummies Technology/General User
Composition Services
Gerry Fahey, Vice President of Production Services
Debbie Stailey, Director of Composition Services
Contents
Title
Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organized
Icons Used in This Book
Where to Go from Here
Part I : Getting to Know Commercial Real Estate Investing
Chapter 1: Just Imagine . . . Commercial Real Estate and You!
What Is Commercial Real Estate?
What to Think About As You Get Started
Understanding the Risks of Commercial Real Estate
Chapter 2: A Crash Course in Commercial Real Estate Investing
How Is Commercial Real Estate Different from Residential Real Estate?
Why Invest in Commercial Real Estate?
What Types of Investments Are Available?
What You Need to Get Started
Myths and Questions about Investing in Commercial Real Estate
Timing the Commercial Real Estate Market
Chapter 3: Evaluating Commercial Real Estate
Talking the Talk: Terms You Need to Know
Figuring Out What a Property Is Worth
Running the Numbers on Some Properties
The Professional Approach to Valuing Properties
Understanding What Creates Value
Differentiating a Good Deal from a Bad Deal
Part II : Getting Started Making Deals
Chapter 4: On Your Mark, Get Set, Go Find Deals
Discovering the Secret to Finding Great Deals
Getting Leads on Commercial Property Investments
Looking Locally and Nationwide
Locking Down Deals: Don’t Leave Home without These Tools
Allowing the Great Deals to Find You
Chapter 5: Strategies for Making Offers and Negotiating
Increasing Your Chances of Getting Your Offer Accepted
Sealing Deals: The Instant Offer System
How to Meet the Seller When Submitting Your Offer
Writing Up the Offer
Presenting Your Offer in the Best Light
The Five-Step Deal Filter
The Seller Has Accepted My Offer! Now What?
Chapter 6: Due Diligence: Doing Your Homework
What Is Due Diligence?
The First Things You Need to Do
Creating Checklists for Effective Due Diligence
Managing the Whole Process
You Found Problems, What Now?
Chapter 7: Closing Your Deal
The Anatomy of a Close
Closing 101: The Basics of Closing a Deal
The Big Picture Show: Questions to Ask Yourself Before You Pull the Trigger
Sweating the Details before Signing on the Dotted Line
Closing Day: What to Expect
Taking Legal Ownership
You’re the Boss Now: What Next?
Part III : Funding Your Deals: Financing and Lending
Chapter 8: Conventional Financing Options
The Commercial Lending Process in a Nutshell
Differences between Commercial and Residential Lending
How Lenders Evaluate Properties
Getting Your Lender to Say “You’re Approved!”
Choosing the Best Loan for You
Assuming the Seller’s Preexisting Mortgage
Chapter 9: Getting Creative with Financing
Creative Financing Techniques
The Master Lease Technique
Getting Someone to Carry Secondary Financing
Getting the Owner to Carry Seconds and Other Secondary Financing
Operating the Wraparound Mortgage Like a Surgeon
Using an Option to Buy
Leveraging the Equity in Your Portfolio
Chapter 10: Raising Capital and Forming Partnerships
Identifying the Keys to Raising Private Funds
Building Your Rolodex of Potential Investors
Deciding Whether to Go It Alone or Use a Partner or Two
Creating the Right Teams and Partnerships
Part IV : Day-to-Day Ownership and Operations
Chapter 11: Property Management: Who’s Minding Your Ship?
I’m the Boss: Managing Your Commercial Property Yourself
Letting Go: Using Professional Property Management Companies
Knowing How to Be an Effective Absentee Owner
Chapter 12: Protecting Your Assets
Taking Asset Protection Seriously
Building a Legal Fortress for Personal Assets
Common-Sense Protection Tips
Chapter 13: Why Properties Fail
What Is a Property Failure?
How You, the Investor, Can Cause Failure
How Management Can Cause a Property to Fail
How the Market Can Cause Failure
Folding Up and Walking Away
Tried and True Tips on Surviving and Thriving
Part V : Kicking Your Investing into High Gear
Chapter 14: Making a Success Out of Commercial Fixer-Uppers
Just What Is a Commercial Fixer-Upper?
Uncovering Diamonds in the Rough
Figuring Out What a Fixer-Upper Is Worth
Mapping Out a Fixer-Upper Game Plan
Avoiding Headaches and Pitfalls (Or at Least Minimizing the Pain)
Timing Your Fixer-Upper for a Quick Sale
Chapter 15: Land Development: The Heart of Commercial Real Estate
The Pros and Cons of Investing in Land
Understanding What Makes Land Worth More
Knowing Whether You’re in the Right Market
Identifying the Three Ps for Successful Projects
Investing in Land with a Team
Finding the Best Places to Invest in Land
With Land, Time Really Does Equal Money
Changing the Property’s Zoning and Getting Approved to Develop
Getting the Green Light on Your Deal
Chapter 16: Expert Tax Advantages and Strategies
An Overview of Money-Making Tax Strategies
Being an Investor or a Dealer: The Difference Is Huge
Naming Yourself a Real Estate Professional: It Pays
Choosing Your Entity: An Important Tax Preparation Before You Buy
Digging into Depreciation
The 1031 Exchange: Avoiding Taxes by Trading In for Another Property
Taking Advantage of Some Commonly Overlooked Deductions
Chapter 17: Leaping into a Commercial Real Estate Career
Becoming a Commercial Sales Agent
Making a Go of It as a Property Manager
Cashing In on a Commercial Mortgage Business Career
Arriving As a Commercial Appraiser
Part VI : The Part of Tens
Chapter 18: Ten Ways to Increase Your Property Value
Raise the Rents
Budget Your Way to Wealth
Give the Property a Makeover
Change the Property’s Use
Add Goodies to the Property
Stand Up to the Tax Man
Pass Utility Expenses to Tenants
Renegotiate the Leases
Bring in a New Management Team
Split Up Your Land
Chapter 19: Ten or So Easy Ways to Network
Get Your CCIM Designation
Put Power in Your Search Engines
Go Directly to the Investment Firms
Read the Trades
For Apartment Owners: Join the NAA
For Office Building Owners: Get Involved with BOMA
For Shopping Center Owners: Enlist with the ICSC
For Property Management Professionals: Become Affiliated with the IREM
Stay Current and Connected
Introduction
Welcome to Commercial Real Estate Investing For Dummies! We both love commercial real estate and are thrilled to be able to share our passion with you. In this book’s chapters, we provide you guidance by showing you our experiences and the combined experience of thousands of our Mentorship students who have invested with us across the country since 1995.
Investing in commercial real estate allows you to:
Make much larger amounts of money while putting in almost the same amount of work that smaller deals, such as single-family houses, require.
Establish multiple streams of income that are generated by properties that almost run themselves. In fact, you discover how to be in command of everything right from your home office.
Retire in five years or less. Sounds impossible, doesn’t it? Well, it really isn’t!
The downside of investing in commercial real estate is that it does take some time to get up to speed. Plan on getting a good education before you jump into your first deal. Oh, and if you’re frightened by the prospect of making hundreds of thousands of dollars from just one deal, investing in commercial real estate is probably not the right path for you.
About This Book
This book is your complete how-to guide for investing in commercial real estate. You may want someone who’s already investing to help you oversee your first deal or two, but our goal is to give you enough information so that you’ll be able to go out and find, structure, and negotiate profitable, money-making deals on commercial properties.
In these pages, you have all the answers to complex issues broken down into an easy-to-read format. Start at the beginning, in the middle, or simply pick a section that interests you most. It doesn’t matter where you start because the most important thing is that you begin today. You may have been looking for your opportunity to become your own boss, make more money than your stockbroker, or simply be able to retire fast by investing in commercial real estate. Now, with this book, you finally have the opportunity and the information you need to take charge.
We mention our students a lot in this book, and that’s because we do 82 percent of our investing with our Commercial Mentoring students across the country. We hope that by sharing the success of others who are just like you, we’ll be able to encourage you to do whatever it takes to live the life of your dreams.
Conventions Used in This Book
We include the following few conventions to help you make your way smoothly through this book:
Important terms are shown in italics, with definitions following the terms.
Boldfaced words highlight the keywords in bulleted lists and numbered steps.
Web sites are printed in monofont.
When this book was printed, some Web addresses may have needed to break across two lines of text. If that happened, rest assured that we haven’t put in any extra characters (such as hyphens) to indicate the break. So, when using one of these Web addresses, just type in exactly what you see in this book, pretending that the line break doesn’t exist.
What You’re Not to Read
If you’re in a hurry as you read through this book, you can skip over some of the anecdotes and sidebars (the text in the gray boxes). These bits of text are interesting, but not essential to your understanding of the basics of commercial real estate investing. However, most of them contain interesting and helpful info that you’ll likely want to go back and read when you get a chance.
Foolish Assumptions
When writing this book, we kept a few assumptions in mind about you:
You’re interested in real estate but you’re probably not as rich as Donald Trump. However, we assume that you aren’t broke and looking for money to make your next house payment either.
You have some experience in business, management, or real estate investing, whether it is in commercial real estate or not.
You’re sharp enough to be investing in commercial real estate, so you aren’t going to rely on us for legal, tax, or other professional advice. After all, one of us is a former auto mechanic, so you should take everything we share with you as our real-world experience. That means you need to combine that experience with the counsel from your own attorney and your tax professional.
How This Book Is Organized
The text of this book is organized into self-contained chapters that you can read in any order. Think of this book as a reference that you can pick up and read bits and pieces of whenever you have the time. (Of course, we’d love it even more if you read the thing from cover to cover.) The chapters are arranged in parts, and here’s what each part covers.
Part I: Getting to Know Commercial Real Estate Investing
This part is where you might just fall in love with commercial real estate investing. Understanding what types of property make up commercial real estate and getting past some of the biggest myths about it will provide a strong foundation that you can use to support all the other in-depth information you get in this book. In this part, you also discover just how simple it is to quickly determine the value of any commercial property. After you understand this formula, you’ll be able to confidently hold your own while negotiating your way to your newfound fortune.
Part II: Getting Started Making Deals
In this part, you discover the four essential steps to every commercial deal you put together. For instance, you find out where the best sources of brokers, sellers, and properties can be found. Then we jump into some serious deal making by sharing with you our Instant Offer System, which shows you how to make successful offers. And because all big commercial deals need to be checked out before you make the final move to buy them, you need to understand how to use due diligence and the closing process to uncover hidden problems, negotiate prices down, or determine when the best deal for you is not to buy. We end this part, appropriately enough, by showing you how to close a deal.
Part III: Funding Your Deals: Financing and Lending
Okay, so you’ve hooked a big deal and are reeling it in. Making sure that you have all the funding you need is critical at this point. In this part, you find out how to get approved for conventional financing. Or, if you like the idea of getting creative and buying commercial real estate without using any of your cash or credit, check out Chapter 9. We close out this part with a chapter in which you discover the secrets of raising private capital from outside investors. In it we also show you how to put together profitable partnerships.
Part IV: Day-to-Day Ownership and Operations
Now that you have bought a property, who’s going to mind the ship? You may be amazed to find out that it isn’t always going to be you! In this part, we cover important points such as how to pick commercial properties that can afford to pay for outside management. And we help you keep tabs on your important investments by revealing our simple “manage the manger” process. In this part, you also uncover the secrets of protecting your assets. Unfortunately in today’s world it isn’t what you make but what you keep that really counts. Finally, you get an insider’s look at something you won’t find in most investing books: the reasons why some properties fail and how you can avoid making the same mistakes.
Part V: Kicking Your Investing into High Gear
When you start feeling like a pro and you’re ready to jump into the fast lane, this is the part for you. These are the chapters where we really get you up to speed. For instance, we introduce you to commercial fixer-uppers. We also help you discover the insider secrets to taking a piece of land through the approval process so that it can be developed. Owning commercial real estate combined with the ideas Chapter 16 can save you tens of thousands of dollars in taxes every single year. Finally, in this part you find out how to jump into a commercial real estate career for extra income or to get an insider’s edge on the deals you’re putting together.
Part VI: The Part of Tens
In this traditional For Dummies part, you quickly discover some important information. For example, we provide the top ten ways to increase the value of your commercial properties. We also include ten great organizations that you should consider joining.
Icons Used in This Book
In this book, we highlight certain types of information with icons so you can find what you’re looking for fast. Here are the icons we use and what they mean:
The text highlighted by this icon usually consists of helpful ideas and strategies to make your investing easier.
This icon highlights important points that are essential to your successful investing.
Investing is fun but it also has pitfalls that you need to watch out for, so this icon does the job.
When we attach this icon to text, you know that you can be sure to get the real-world scoop from stories and investing ideas that come from Mentorship students and our own deals.
This icon reminds you to do more research, hire an inspector, or consult with an attorney or tax advisor.
Where to Go from Here
This book is written so that you can jump into the shallow end or you can go off the high dive, depending on your experience level. You can begin anywhere you want — none of the chapters need to be read before any of the others. So, if you need a refresher course, start with Part I. If you’re more experienced and want to kick your investing into high gear, check out Part V. Otherwise, simply peruse the table of contents or the index to find what you’re looking for. To understand what commercial investing can do for you, check out Chapter 1. Whatever you do, don’t let this book get out of your hands without reading Chapter 15, which is all about land development. In this chapter, you can find out how some of our most passionate students have made millions — yes, that’s millions of dollars — doing big land development deals.
Part I
Getting to Know Commercial Real Estate Investing
In this part . . .
In this part, we help you understand what types of property make up commercial real estate and also help you get past some of the biggest myths about it. We present information that will enable you to simply and quickly determine the value of any commercial property. After you understand this formula, you’ll be able to confidently hold your own while negotiating your way to your newfound fortune.
Chapter 2
A Crash Course in Commercial Real Estate Investing
In This Chapter
Understanding the basics of commercial real estate
Surveying the types of investments available
Discovering the tools you need to get started
Debunking the myths of investing in commercial real estate
Keeping timing in mind when selling, buying, and holding
What comes to mind when you think of commercial real estate? Downtown skyscrapers? Corner strip malls? Apartment complexes? Okay, that’s a good start. But have you thought about being the owner of one? Too complex you say? Too expensive you think? Jumping into commercial real estate investing could be the wisest and most lucrative investment you ever make. To us, the benefits outweigh the risks. But find out for yourself.
In this chapter, you find out what commercial real estate is, and you discover the different types available. We break down the big world of commercial investing into easy-to-follow categories so that you can pick and choose your favorites. We also uncover the five biggest myths that stop people from investing and understanding commercial real estate.
Because the value of commercial real estate depends on the cash flow that it produces, we show you how cash flow is made on a monthly basis, and we help you discover the steps to building long-term wealth. We also tell you when it’s the most profitable time to buy, hold, sell, or bail (we even share with you ways of predicting the future!). By the end of this chapter, you’re sure to be convinced that commercial real estate is, by far, the best way to produce true and lasting wealth.
How Is Commercial Real Estate Different from Residential Real Estate?
Here’s our definition of commercial real estate: It’s any piece of real estate that’s bigger than one house on one lot. So, commercial real estate includes everything from small apartment buildings (five or more units) and large office buildings to shopping centers, to industrial parks, and even land development.
The three biggest differences between commercial real estate and residential real estate include the following:
Commercial real estate projects are passive investments only after they’re up and running. Remember that unless you have a ton of money and don’t care about getting huge returns, commercial real estate will take a lot of your time and effort to get started. After all, you have to deal with many things, including the learning process, finding the right mentors or teachers, searching for the right deal, financing your investment, picking management teams, protecting it from lawsuits, and overseeing the project.
The good news is that after you have a commercial project off the ground, it’s usually big enough that it allows you to pay other people to take care of it. So it won’t take much of your time at all — and that’s why it’s called a passive investment. Compare this to a single-family home that may require collecting rents and making repairs for many years to come.
Commercial real estate has the potential to make you rich with just one deal. Doing one commercial deal the right way can generate you a profit several times your yearly salary in addition to providing you sizable monthly income as long as you own the property. Residential real estate can produce a sizable profit as well, but it will not generate anywhere near the cash flow that a commercial property will. You’ll receive one check per month from a single-family residence, but you can receive several hundred checks per month from a commercial property.
If you don’t believe us, consider these numbers: When several of our Commercial Mentoring Program clients were sharing how they got started in commercial real estate, we found out that one of them is in a project that already has a profit of $10 million or more. Another one bought a piece of land near his home for $1.5 million, and it has jumped in value over the past two years to $9 million (and he didn’t even have to use his own money).
The people that you meet who invest in commercial real estate are all big thinkers. They’re people who have decided that they want to think big, live big, and hang around other people who are just as passionate about life as they are. Until you get involved, it’s difficult to really understand just what your life could look like. Investors of residential real estate think of one monthly check and one tenant, they wait for appreciation (which may never come), and they’re limited in ways of creating massive value for their property.
Why Invest in Commercial Real Estate?
We think commercial real estate investing is a great way to generate wealth, and the main reason we like it so much can be boiled down to one word: leverage. Leverage is what allows you to use a small amount of your time and money to bring you a magnified return. Commercial properties are usually bigger and more valuable than other types of real estate, such as houses. What this means to you is that after you figure out how to find, negotiate, and buy commercial property without using much of your own money, you’ll be able to sit back and watch the magic of leverage work wonders for your financial future. Your family will thank you for generations to come.
When people get started with their investing, most of them dream of creating a six-figure annual income stream so that they can quit the rat race. However, deep down many of them have doubts that they can actually make it happen. But never fear. The goal of this book is to give you the starting steps and specific know-how to help you realize that you really can live the life of your dreams. And we want you to do it in a way that creates the lifestyle you want without years of hard work. We’ve helped other clients do it, and we know you can do it too.
Understand that there are still going to be naysayers out there who say you can’t invest in commercial real estate in today’s market, in today’s economy, or in today’s cosmic layering of celestial occurrences. But you have a choice. You can either buy into what these financially stressed-out individuals are desperately clinging to, or you can let go of everything that’s been holding you back and go after the future that you want and deserve.
Let us be clear: Commercial real estate allows you to make whopping piles of money. With commercial real estate you can make anywhere from $20,000 to $50,000 on a little deal. And, you can make $10 million or more from a bigger property. Sound interesting? Does it take work? Sure it does. But a $100,000 commercial deal doesn’t take anywhere near ten times the work that a $10,000 residential deal takes. So what you’re doing is working at a higher level that rewards you with the opportunity to make a lot more money with just a little more effort.
What Types of Investments Are Available?
Most people think commercial real estate is all about apartment rentals. Even though residential properties are a big part of commercial real estate investing, other types of properties make for excellent investment opportunities as well. For instance, commercial real estate includes offices and warehouses, retail centers, and even undeveloped land.
We define commercial real estate as any real estate that’s bigger than one house on one lot. So even if people live in the property, it’s still commercial as long as it’s bigger than one house. Some people would argue that a little property like a duplex or a four-unit isn’t really commercial. That’s ok. We like keeping our definitions simple. Actually, five or more units in an apartment building is considered commercial, but who’s counting? We explain each of the different types of commercial property in the following sections.
Apartment buildings (also known as residential properties)
The commercial properties that are in the residential category include everything from small apartment properties (five or more units) to huge apartment building projects that cover several city blocks. You drive by thousands of commercial properties like this every day (or you may even live in one). Every single building you see is owned by a commercial investor who’s in the game to make money. (Now anytime you see a nice apartment building, you won’t be able to stop thinking about getting into commercial real estate investing.) What we find great about investing in apartments is that they’re easy to find, banks love to lend on them, and they’re great cash flow generators.
