Commercial real estate is a Fantastic, exciting business that can present an abundance of opportunities for interested investors! Many people are often hesitant to enter such a market as commercial real estate for many different bases. In fact, there are some major misconceptions about commercial real estate which is being addressed herein.
Numerous people who hear about commercial real estate, but aren't necessarily in the business, often use the expression "Location, location, location!" Many people associate this expression as the truth, that the three most important attributes about a property are "Location, location, location!"
This is absolutely not the case! Now, in many scenarios location is not important, but what if you have a beautiful location for a beachfront resort, complete with sandy shores, a perfect location for a hotel, and beautiful sun rise and sundown views? What you want to do to the property is improve it for a weekend getaway for romantic couples with a beautiful beach resort, luxury type accommodation, and perhaps some entertainment locations overlooking the sea. Sounds great, right?
The perfect location you can't beat it! But, you learn that the zoning for this property is residential, single family, and no commercial property allowed. What happened to your "Location, location, location?" It flew out the window!
The most important aspect of a property is the use. What is it projected for by designation of the city or county? It does not matter where the property is, if you cannot get the zoning that is in the realm of your projected use.
It is Feasible to get properties rezoned, especially as cities change and grow. Make sure to consult with the city or county Zoning Department to determine if these changes are at all feasible, because you do not want to purchase a property that is impossible to rezone, and be left with an unsuccessful project in your portfolio.
Most people believe that commercial real estate is complex and you need a special education or know how to succeed in the business. Scores of people think that commercial real estate is filled with international finance, Extreme and complicated math, convoluted tax rules, and forms and applications that are just too complicated to understand accurately.
This misconception is the worst, because it puts a road block in front of many people's aspirations to pursue a commercial real estate investment. To put this misconception to rest, the math involved is not at all complicated, simple ratios, adding, subtracting and multiplying. What is even better, there are others who can do the math. The same is true with property management, inspection, and preparing the year-end tax report. Actually, commercial real estate is less complicated than residential real estate because investor's focus is consolidated towards a single deal that may quantify numerous residential properties.
Putting it into perspective, if one owned a business, would conduct daily chores such as: create strategies, keep the books, do inventories, sell items on the front floor, tidy up and dispose of the trash after the day was over? Not the commercial property investor! Commercial real estate is made up of many people whom are there to help with whatever needed. Investor must be positioned as a real estate insider, which is a leader in the business.
Another misconception is commercial real estate is management intensive, that investor must manage every property exist in the prtfolio. Owning 10 or more properties, become almost impossible to manage alone! That is the property management's position, allowing the investor to concentrate on creating more deals. Investor should hire a company or set a team in place to take care of daily business.
Public's understanding and dialogue about commercial real estate is not always true. Before staring a carrier as an investor, be sure to get your facts straight. Indeed, many people in this profession address commercial real estate as a business in which only the savvy and sophisticated can succeed. This is because they prefer to keep people out of the market by differentiating themselves.
Real estate is frequently acknowledged as the safest investment opportunity. Actually, in today's market, choice of property portfolio and investments is done with proper evaluation. Determining the true value can lead to good profits. This is one of the reasons some pursue this line of investment as a full time job. Generally, the consultation of real estate are focused towards residential properties and commercial real estate seems to take a back seat. However, commercial real estate is also a good venture for short and long term investment with profit prospective.
Commercial real estate comprises a set of separate types of properties. Most people relate commercial real estate with only office complexes or retail and industrial units. However, the commercial real estate is not limited to the few. There are more opportunities to commercial real estate. Health care centers, retail structures and warehouse are all good examples of commercial real estate. Tourism and hospitality industry, hotel, motel and team parks, mobile home parks, with reliable professional management in place, Golf courses and luxury real estate, even residential properties like condominiums, apartment buildings and property that consists of more than four residential units are considered commercial real estate. In fact, such commercial real estate is greatly in demand.
so, is commercial real estate really profitable? Precisely, if it were not profitable most investors would not have been selecting as primary career, Commercial real estate is positively profitable for many. The only thing with commercial real estate is detection of the opportunity is a bit difficult as compared to residential real estate. But commercial real estate profits can grow real big a great deal bigger than one would expect from residential real estate of the same proportion. You could take up commercial real estate for either reselling after appreciation or for renting out to retailers. The commercial real estate development is in fact treated as the first sign for growth of residential real estate. Once you know of the possibility of sizeable commercial growth in the region you should start evaluating its capability for appreciation in the prices of commercial real estate and immediately make a move to negotiating a good deal and secure the property, before the shrewd and savvy investors go for it . If you find that commercial real estate, i.e. land, is available in big parcels which are too expensive for the budget, forming a small investor group with your acquaintances and buy it together and share the profits. In some cases when a retail boom is expected in a region, it may be feasible to buy a property that can be converted into a warehouse for the purpose of renting to small businesses.
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Commercial real estate awards a wealth of profitable investing opportunities. It is up to the investor's goals and efforts to make the most of it. Timing is ideal to take advantage of the soft market and profit from the upswing trend for the bottomed out real estate period.
Seller's Market is progressively replacing the Buyers Market, and its fruition is not in a distant future.
There are several types of real estate, and various methods for investing in them:
* Single Family Home Rentals: Advantage points: It may be easier to start, and produce long term positive return on investment. Disadvantage points: Inconvenience of being a landlord, and typically long time delay for the big pay-off. Also loss of income, due to vacancy.
* Residential Fixer-uppers: Advantage points: Fast returns on investment, and may be more rewarding for creative work. Disadvantage points: Possibility of unpredicted consequences, unwanted delays, and higher taxes on capital gain.
* Low income housing: Advantage points: Comparable other rentals, with higher cash flow. Disadvantage points: Parallel to other rentals, with more work on repairs and tenant problems.
* Lease-option, rent-to-own houses and condos: Advantage points: Buying a home or condo for cash, then lease it with option to buy, a rent-to-own arrangement, rent would be higher, and the buyer is usually responsible for maintenance of the property. Disadvantage points: Most tenants don't complete the purchase (May be another advantage, but it creates more work and maintenance) Bookkeeping can be more complicated.
* Retail, Office and Commercial properties: Advantage points: Long term triple-net leases, resulting in little management and high returns. Disadvantage points: Market compatibility and loss of income on vacancy.
* Land investment, Subdivision and Resell: Advantage points: Less complicated than some real estate investments, with the possibility of extreme profits. Disadvantage points: Longer process, more expenses, no cash flow until it is sold.
* Hotel, Motel and Boarding houses: Advantage points: Generate more cash flow, especially renting by the room, in a tourist or college town. Disadvantage points: More maintenance and housekeeping work in Hotels and Motels. Also, renting a house or condo by the room in a college town.
* Cash investments, selling with terms: Advantage points: Rate of return is amplified by paying cash, to negotiate a better price, and selling on easier terms, to persuade a higher price and elevated interest rate. Disadvantage points: A lot of cash is needed, that would be tied up for a long time.
* Invest in personal residence, sell it after living in for two years: Advantage points: Repair and renovate with tax advantage, and sell it higher for tax-free profit and repeating the process. Disadvantage points: Becoming attached to investment, and relocate more often.
* Speculation: Advantage points: Significant profits for buying low in the path of growth, and holding until values rise; normally it is a low-management investment. Disadvantage points: Growth in value is not guaranteed, but maintenance and property tax expenses and transaction costs may decrease much of the profits.
There are many ways to invest in real estate These are just to get you thinking about what is possible, and what type of investing suits your criteria. Once you figure that out, you may want to look into other categories of real estate investment.