Commercial Property Rental and Sales

Real Estate market is cyclic, meaning that it goes up and down in cycles. As we all know from hearing news about tons and tons of for-closures, the market is in a down cycle right now. I don't know whether we have hit the bottom yet or how long before the market starts to improve. However, following the buy low sell high principal, now would be a good time to purchase investment properties.

There are many reason for you to decide whether real estate investment works for you or not. Most importantly, it depends on your particular financial situation and your investment objectives. Comparing to other investment options, real estate investment has some advantages over others:

Cash Flow - Steady source of income to potentially replace your job income.

Appreciation - When the market goes in upswing, your property is likely to worth more than what your purchased it for.

Leverage - You can get started with very little amount of money as your capital. Your monthly cash flow can be used to offset your mortgage payments.

Amortization - Cash flow and leverage working together to reduce your outstanding balance on the property.

Tax Deductions - Mortgage interest, operating expenses, and depreciation are all good sources of tax deductions that save you money to boost up your net operating income (money in your pocket).

Commercial properties are different from residential property in that they are typically used for income-producing businesses whereas residential properties are typically used for dwelling. Commercial properties include Multi-Family, Office, Industrial, Retail, Shopping Center, Hotel/Motel,... etc.

Before jumping into actions, you need to do your own preparations that will help you answer questions such as these:

1. Where is a good area to invest in?
2. How do I evaluate if a particular property is a good rental property?
3. How do I calculate my cash flow and return of investment before buying the property?
4. How do I get qualified for mortgage?
5. How do I deal with property management?

Insider Secrets to Financing Your Real Estate Investments: What Every Real Estate Investor Needs to Know About Finding and Financing Your Next Deal is a highly recommended book that offers a step-by-step guide to buying an investment property. The author, Frank Gallinelli, written this book as Rules of Thumb as well as forms and checklists to show you:

• Selecting the best real estate investments for individual investor needs
• What lenders are really looking for in real estate investors
• Creating winning loan presentations
• Closing statements and what to expect when the deal is sealed

If you want to dig even deeper. Frank's other book: What Every Real Estate Investor Needs to Know about Cash Flow... And 36 Other Key Financial Measures will go into details on the numbers involved in evaluating a property. The book looks at case studies and walks you through calculation for each of the 37 basic formulas that include:

• Discounted cash flow
• Cash-on-cash return
• Net operating income
• Capitalization rate
• Gross rent multiplier
• Net present value
• Payback period
• Mortgage amortization
• And many more

This book is all about the numbers that you need to know about a potential investment property. You don't have to be a rocket scientist to use the formulas in this book. For each formula, Gallinelli clearly explains its significance for real estate investors, walks you through it, and provides examples and sample problems to help you master it. As an added bonus, the book supplies useful forms and spreadsheet templates that you can use to simplify many of the calculations. If you want to become a successful real estate investor, I highly recommend that you get familiarized with these calculations.

Okay, so now that we have done all of the homework, let's get started in looking at some properties. My favorite place is LoopNet.com. You can sign up for a free account and start looking at properties nationwide. Once you locate the property you are interested, contact the seller or agent for additional information and start plugging in your numbers!

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Real estate investing is considered to be a safe investment over time. This is one reason why many do this as a full time profession. One can also invest in real estate and not be involved full time. Most people think of real estate investments as homes or condos or multi-family properties. Commercial real estate is another excellent choice when it comes to investing in real estate.

Commercial real estate investments typically allow the owner to continue their day to day unrelated business while their hired professionals upkeep and maintain their commercial property investment. Although most people think of commercial real estate as office buildings, retail stores, or industrial facilities, there are a lot more property types in the commercial real estate.

Some examples include properties such as health care centers, retail structures and warehouse. One of the most desired and financed commercial property is called residential. More specifically, apartment buildings (real property that consists of more than four residential units) are considered commercial real estate.

Most people consider commercial real estate difficult to enter due to financing and larger down payments than residential property. Although this is true to an extent, there are many commercial financing programs that will offer up to 90% financing and some even up to 97% financing for small commercial properties up to $1 million dollars. Of course, commercial mortgage loans go significantly higher to $500,000 and more.

Commercial real estate investing can be significantly profitable due to increasing rents, inflation and material costs. An investor must be able to analyze an opportunity more thoroughly in commercial real estate versus residential real estate. Some initial analyses involve the rent rolls, pro-forma statements, and operating income. These numbers are crucial to the lenders to determine the amount of financing you will receive. Once you know the amount you will receive from the lender you can easily determine if the investment is worthwhile. You could take up commercial real estate for either reselling after appreciation or leasing out to residential tenants or retail tenants.

If you research and learn there will be substantial commercial growth in the area (due to tax breaks or gentrification), it may be wise to evaluate the potential for appreciation in commercial real estate and then seek out a good investment. If you find that a multifamily or office property, for example, is available but too expensive for you to buy alone, you may want look at joining or creating a small investor group and acquire it together. In another example, you might find it lucrative to purchase a commercial property that you can change to a warehouse which you can then rent to small businesses. As you have learned here, there are many creative ways to achieve success in commercial real estate investing.

Frank Collins is an investor and contributor for websites about Multifamily Investing and Commercial Fi