Commercial real estate investing is a better investment than investing in residential property? Now we all know that real estate is usually an investment vehicle and the two large residential and commercial properties can be good investments. Avenue can be a huge impact on your net worth, but most people only think of a property if they think about investing in real estate. All this is certainly the most appropriate way for most people, commercial real estate can not provide additional benefits to the residential model can offer.
Three reasons are better than commercial residential investment offers:
1). Commercial Real Estate offers you more access to more capital
It is my experience that it is a bit easier to raise large amounts of capital (less than $ 3 million) to increase by a commercial offer at $ 150,000 contract for a house. As an investor, your access to housing capital is primarily due to traditional financing, limited hard money lenders and private money from investors. If you are not able to raise capital are from one of three ways, then you are forced to purchase goods with the owner of a creative financing, subject strategies, lease options, etc. This is not itself a bad thing, But unfortunately you have a few bargains that can not be purchased to run with creative financing techniques.
Bundle in the commercial real estate financing, it is common for investors to invest their capital together and treated Union, you will also find that small business private equity and finance companies are more willing to make joint-venture projects and provide the necessary capital, to complete the transaction, if a lot of sense. Then as a commercial investor, you have the ability to raise capital for an agreement from the same sources as residential projects such as traditional financing and difficult to collect money, but also you can access to capital by small businesses in private equity, hedge funds, private REITs, investment groups, and the list goes on.
It seems also a sense of intrigue and prestige have when it comes to investing in commercial transactions. Perhaps because of the current state of the commercial market, it seems investors are more oriented to invest in commercial projects.
2) Commercial Real Estate is less competitive
If you think about it from a marketing point of view, most investors target homeowners that the housing market more competitive. In many arenas, from industry news sources, the World Wide Web, all the ?We Buy Houses? signs on almost every street corner there are many marketing tactics to promote the residential owners. If you discuss the same marketing strategies and take on commercial real estate, you will probably find that you are the only person in contact with these commercial owners to sell their property. Most commercial properties of less than $ 5,000,000 are generally too large for most residential investors, too small for most institutional investors.
3). Commercial Real Estate allows a ?forced? Appreciation
Residential properties are generally based on comparable properties that were sold in the region and are rated similar in functionality. If the ?comps? for Room 3 / 2 bath home in a neighborhood of about $ 100,000, then your property is likely to be at a value of $ 100,000. It is not too much if your target property has additional features that matter, or if your home is $ 900 per month in rent instead of the house on the street, that the rent $ 700 per month. All in all, your property will be evaluated more fairly be close to the ?Comp? in the region.
But in the commercial real estate financing, the valuation of a property on the turnover is generated by the property. Now commercial property still subject to ?comps? of the area, as it is about the ?how? refers to the revenue are evaluated in terms of capitalization rates. But the general premise is that the more income a property generates more value than the property is.
In order to ?force? that is, the value of your commercial property, you have additional ways to find revenue increase generated by the property. A slight increase in revenue to increase the value of a property depending on the ?cap rate? in the region for this type of commercial property. Unfortunately, with residential real estate is not an option, you really can not force appreciation. Your property will be assessed in the general area of ??market comps.
What you see now, offers many advantages over commercial real estate investments in housing, in addition to a higher return on your investment.
Now of course there are also disadvantages of each type of investment, including commercial real estate. However, you should consider the following when choosing between private and commercial investment to your passive income source to create;
1) The building meets the requirements for the loan, the borrower
2) The building shall not loan, the borrower
3) Allow others to the building to manage the borrower
4) income determines the value of the land, not comps
5) activation rate measures the demand for goods, not comps.
In summary we can say: The value of commercial property is income producing assets and forever linked the general demand for the services of the property. Therefore, depending on the location of the land and the optimal use, commercial real estate investments can certainly provide a higher return on your investment of time verses on investments in residential real estate. Perhaps even more so in our current market cycle.
Source: http://www.commercial-real-estate.org/commercial-real-estate-investing-vs-residential
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