Successful commercial real estate investors can be described as resourceful, knowledgeable, and willing to take action. There is no magic formula for success -- they have figured out which steps to take and which ones to avoid as they build their portfolio.
Understand the Benefits of Investing in Commercial Real Estate
Investing in commercial real estate provides several potential benefits that are hard to overlook for people looking to grow their financial portfolio. Some of the most common include:
● Higher ROI – It’s often possible for investors to generate more revenue from commercial properties than single family alternatives.
● Consistent Cash Flow – The stream of income is typically more reliable and leases are often longer; plus, multiple units mean multiple income streams.
● Less Competition – The commitment involved with commercial real estate is often outside the comfort zone of many would-be investors, creating more opportunities for those who want to be part of the action.
2. Evaluate Before Taking the Plunge
Before you make any financial commitments, it’s important to evaluate the property with a thorough market analysis to help determine if the property you are interested in will indeed be profitable.
Performing market research ahead of time will give you an idea of how profitable the property is going to be, and it will help when it comes time to secure a commercial real estate loan. Knowing how the property is going to generate income and how much it will generate is a critical part of breaking into commercial real estate investing.
3. Work with a Lender That Understands Your Comfort Level
Lenders that take the time to explain the transaction process and communicate throughout each stage can make you feel much better about your first commercial investment.
As you speak to representatives from different lenders, be sure to note their general demeanor and their ability to gauge your familiarity with commercial real estate lending. A lender that prioritizes a positive borrower experience can make a big difference as you work to break into the industry.
4. Learn and Understand Key Terms
Before you dive into commercial investing, familiarize yourself with some of the terms that you'll be hearing during the process. Most investors know what ROI means and its significance, but you should also know terms like "Net Operating Income," "Cap Rate," and "Debt Coverage Ratio."
If you feel you need to improve your familiarity, head over to our Loan Terms page and view our definitions.
5. Have a Long-Term Plan
Just like you need a solid plan to get into commercial real estate investing, you should also have a long-term goal for each investment property. That could mean renovations and growth, buying out partners, or selling by a specific date to maximize profits and move on to other investments.
If you do your research and take advantage of the resources provided by others – including lenders – you’ll be well on your way to breaking into the world of commercial investing. If you're ready to take the next step, visit InvestmentProperty.Loans and apply now!