My Thoughts On Commercial Real Estate Investing | Gold ...

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Commercial Real Estate Investing vs. Residential Real Estate

Is commercial real estate investing a surpass investment than investing in residential real estate? Now, we all know that real estate in all-purpose is a fantastic investment vehicle and both residential and commercial properties can be excellent investments. Either avenue can have a tremendous look on your net worth, but most people reckon only of residential property when they reckon about investing in real estate. While this is certainly the most viable route for most people, commercial property can offer bonus benefits that residential real estate can?t.

3 Reasons Commercial Real Estate is surpass than Residential Real Estate

1.) Commercial Real Estate Gives You More Access to More Capital

It has been my experience that it is somewhat simpler to raise larger amounts of capital (under $3M) for a commercial deal than it is to raise $150,000 for a residential deal. As a residential investor your access to capital is limited primarily to traditional financing, hard money lenders, and private money from party investors. If you are powerless to raise capital from one of these three avenues, then you are forced to buy property in more of a creative manner with owner financing, theme to strategies, lease options, etc. This in itself is not a terrible thing, but sorry to say you will have to walk away from some excellent deals that can?t be bought with creative financing techniques.

In commercial real estate it is more common for investors to pool their capital together and syndicate deals, you will also find that smaller private equity firms and finance companies are more inclined to do joint venture projects and grant the needed capital to complete the deal if the deal makes sense. So as a commercial real estate investor you have the potential to raise capital for a deal from the same traditional sources as residential real estate i.e. Traditional Financing and Hard Money, but in addition to that you can have access to capital through smaller private equity firms, hedge funds, private REITs, investment groups, etc.

There also seems to be a sense of intrigue and standing when it comes to investing in commercial real estate. I don?t know because of the contemporary commercial construction market it appears investors are trending to investing in commercial projects.

2.) Commercial Real Estate is Less Competitive

When you reckon about it from a marketing perspective, most investors target residential property owners, thus making the residential market more competitive. In many arenas from industry news sources, the World Wide Web, all the ?We buy Houses? signs on effectively every city corner, discuss marketing tactics targeting residential property owners. If you take the same marketing strategies discussed and apply them to commercial real estate, you will probably find that you are the ONLY self contacting these commercial property owners in regards to selling their property. Most commercial properties under $5 million tend to be too large for most residential investors, yet too small for most institutional investors.

3.) Commercial Real Estate allows for ?Forced? Appreciation

Residential real estate is typically valued based on other akin properties that have sold in the area that are similar in facial appearance. If the ?comps? for a 3 bedroom/2 bathroom house in a fastidious locality is roughly $100,000, then your property is probably going to be worth $100,000. It doesn?t matter too much that you have bonus facial appearance, or that your house is getting $900 a month in rent as opposed to the house down the street that is only renting for $700 a month. All equipment considered, your property will still be valued pretty close to the ?comps? of the area.

Even if, in commercial real estate, the valuation of a property is based on the revenue that the property generates. Now, commercial real estate is still theme to the ?comps? of the area as it pertains to ?How? that revenue is valued in terms of capitalization rates. But, the by and large premise is that, the more revenue a property generated, the more that property is worth.

So, in order to ?force? the appreciation of your commercial property, you need to find bonus ways to increase the revenue that the property generates. A small increase in revenue can increase the value of a property significantly depending on the ?Cap Rates? in the area for that type of commercial real estate. Sorry to say, with residential real estate this isn?t an option as you really can?t force appreciation; your property will be valued in the all-purpose range of the market comps.

As you can see, commercial real estate investing offers many benefits over residential real estate in addition to higher returns on your investment. Now of course there are disadvantages with any investment vehicle, commercial real estate included. Even if, consider the following when choosing between residential or commercial investing to make your passive income spill;

Commercial vs. Residential:My Thoughts on Commercial Real Estate Investing

1) The construction qualifies for the loan; Not the borrower
2) The construction pays back the loan; Not the borrower
3) Others are expected to deal with the construction; Not the borrower
4) Income determines the value of the property; Not the comps
5) Cap Rate measures demand for the property; Not the comps.

A commercial property?s value is eternally tied into the income the property produces and the by and large demand for the property?s air force based on its location & its highest & best use.

Source: http://www.goldinvestmentprofit.info/3550/my-thoughts-on-commercial-real-estate-investing.html

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