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Investing Tips: Choosing If Commercial Real Estate Is Right For You

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Real estate is a hot commodity in the world today, particularly here in the United States. It’s said that on average, a real estate agent can make anywhere between 35K and 95K per year, and that’s just on a part-time basis. 

But, what about all of you real estate investors out there?

According to recent studies, an average real estate investor can earn anywhere between 70K and 130K per year. And, this is basically modeled on those who invest in single-family homes, vacation rentals, and the like. However, investing in apartments can increase this annual revenue (in some cases) up to threefold or more. 

So, how do you go about investing in apartment complexes? If you’re considering investing in commercial real estate, there are several elements that you must consider. Here, we’ll outline a few particulars of investing in apartments and commercial property.

Choosing the Property

If you’ve ever driven around any urban area in the United States, you’ve probably noticed a ton of apartment complexes. Many of these are nice, quaint, and offer each tenant the affordability of living in their community. 

But, you might have also noticed that several of these apartment complexes are in poor condition, or could use a good bit of TLC. Some buildings are in such bad condition that they might even be tilted, or leaning off of their foundations. This is important to note when hunting for investment properties, as you don’t want to invest in a money pit.

Having a thorough and licensed building inspector survey your prospective property choice, along with getting an appraisal, is your first step in choosing a property that you’ll want to invest in. 

During the inspection, appraisal, and buying process, full disclosure of all of the property’s conditions, whether good or bad, is given to you. As such, if you find that a property has far too many red flags or warning signs, it’s best to avoid the property altogether. 

You don’t want to take out a loan on a property that won’t gain you any revenue, or provide you with the means to pay your loans.

Considering the Size

At first, you might think that the bigger the complex, the more money you’ll be able to make. More tenants equals more rent money, right? Well, not so fast.

Though large complexes offer much more revenue, they also require much more upkeep. This is true not only with each unit and with the overall property itself, it’s also true with the tenants. Yes, you have to keep up with tenants as well. Because, if a handful of your tenants fail to pay rent, you’ll be left covering that cost. 

If you’re just starting out, it’s best to start small. 4-unit complexes are a perfect way to begin your commercial real estate endeavor. These offer you a starting point, and you’ll only have 4 units to keep up with, and 4 primary tenants as well. 

You’ll be able to perform maintenance and general upkeep, renovations, and any necessary modifications without the overarching pressure that you would in a multi-unit complex of 20 or 200 residents.

Identify Your Capital 

While some investors might have the startup capital to get into commercial real estate with ease, others might need assistance. 

Investing in commercial real estate can be costly, and for this reason, it will probably be a more attractive and time-saving option to secure a commercial real estate loan. Saving up the money to invest will take some time, but if you have decent credit and valuable collateral, you’ll easily be able to secure a loan to gain the capital you’ll need to begin your investment career.

Investing in large properties might seem like a huge undertaking, but with proper time management and business skills, you’ll find that it’s not such a gargantuan task at all.

Apartment investing can be a fun and rewarding experience, and bring you extremely large returns in the face of your initial investment. In fact, in a few years, you might even own several complexes, and be smiling every time you check your bank account.