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If you want to buy commercial real estate and make smart investments, these 5 tips should teach you how to turn a profit without compromising your financial security. Real estate is one of the few markets where you can make a substantial amount of profit without having to invest too much time and effort. Once you have the funds available, spotting good investments and turning thousands of dollars in profit becomes a realistic opportunity. However, when you’re just beginning, buying commercial real estate can be very intimidating.
#1 – Do not rule out foreclosures or short sales in commercial real estate
The lending bank of the previous or even current owner lists foreclosures and short sales. Banks are not in the real estate business and they are merely listing the property to get it off of their hands. Banks typically lose money on these sales because the owner before you failed to make payments toward the mortgage, so the loan has now been completely dropped by the bank. They aren’t looking for profit, they are looking to get out and wipe the slate clean. To a buyer, a short sale or foreclosure often means more work and a longer closing process, but they are prime opportunities to score a good deal.
#2 – Don’t get antsy Being impatient during the buying process could force a bad decision. Take your time and wait for the perfect opportunity before you make an offer. Impatient buyers often make poor investments and the end result will be less profit. Commercial real estate is a big move so it’s important to not rush the process. The closing process might take longer than it would for regular, single-family home. This should be expected and it gives you time to prepare for the investment that you have just made.
#3 – Smaller is not always easier to manage
When investing in a condominium or apartment complex, having fewer units in the complex does not necessarily mean it will be easier. Buying commercial real estate is going to require commercial financing and a long and drawn out closing process. This is true for all sales, big or small. This process and investment should be well worth the wait, so try to think big. If you want to be successful and earn a significant return on your investment, more units in the complex is a great way to accomplish this.
#4 – Know the numbers
Real estate is a numbers game. You may not be an economist, but you can certainly do the math. Know your numbers and do as many calculations as you can before you make an investment. Take the loan, interest rate, expected renovation costs and price you will earn per unit into account. If you do the math prior to making an investment, you will be much more confident with your decision. You may even want to speak with a financial advisor so that you have more than one opinion on the matter.
#5 – Find a good lender and choose your investment partners carefully
Partnering up in real estate can help you buy bigger properties and be more successful. Find a good lender and if you can’t meet the investment requirements on your own, consider finding a partner. However, be very careful with the partner that you choose. Running a business with a partner can create complications and cause conflict. If you aren’t certain about your partner, it’s probably a good idea to keep looking. The partner you choose should have a similar personality to yourself. If you are facing difficulties agreeing with one another, they may not be the partners for you.
This article was written by Ori Tal who is a Real Estate Developer from Cocoa Beach Florida wrote this article.