Commercial Real Estate Investment
Posted on March 9, 2010
Filed Under real estate property |
Investing in commercial real estate is riskier and more costly than investing in residential property - but ultimately it can be far more profitable. Whereas the stocks of major housing manufacturers have decreased over the last few months, retail and institutional investors have been investing heavily in commercial real estate, through both operating companies and investment trusts.
The profits from commercial real estate are linked to a large degree to the state of the overall economy - today, commercial property is a $4 trillion market, having increased in volume around 20% over the last five years. Most smaller investors are able to profit from commercial real estate.
The potential profits to be made from investing in commercial real estates are affected by several factors. Apart from the overall economy, the local economy and market can have a huge impact, as can the terms and length of any lease, the reliability of tenants and the overheads involved with your property.
Generally speaking, when investing in commercial real estate, to make a profit you should ideally have a long term lease from a major tenant. Finding the right tenant isn’t always easy - most commercial real estate has relatively few potential tenants unlike residential property.
During a recession, commercial foreclosures and vacancies tend to increase significantly more than residential properties. And if commercial properties remain vacant for a long period of time, owners may lose a lot of income and be forced to resell for less than the property is worth.
One method of generating a profit from commercial real estate is to look at REITs (Real Estate Investment Trusts). These are traded securities which allow an investor to take part in large scale commercial projects. REITs were created in 1960 by Congress and can be a practical alternative to bonds.
Most REITs specialize in certain types of property such as office buildings, hospitals or shopping centers. There are several benefits of REITs: they trade in the same way as stocks, so you can buy and sell them. The share price can increase in value as the property appreciates in value and shareholders also get income from rents.
Not surprisingly, REITS have become extremely popular over the last few years. Another big advantage of them is the tax benefits - by law, REITs must distribute 90% of their income as dividends.
There are several ways to invest in commercial real estate without actually having any capital. Subordination is the term for the situation in which the current owner actually takes out a second mortgage on the property to cover the difference of the amount that the purchaser has available in the form of a loan.
Another method is to persuade the owner of the property to release some acreage. That section of land can then be used to borrow money to cover a down payment on the rest of the property. Many property owners don’t even know this option exists and it can be an effective strategy when dealing with raw land.
Another method is to purchase commercial property by means of a partnership. If you are able and willing to do the work, you may be able to find a partnership that is willing to finance your deal - in exchange for a percentage of the profits, of course.
Investing in commercial real estate isn’t for everyone. But the profits can certainly be made for those who are prepared to take a calculated risk, have the expertise - and perhaps a little bit of luck.
Casey Yew
http://www.articlesbase.com/investing-articles/commercial-real-estate-investment-80898.html
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5 Responses to “Commercial Real Estate Investment”
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Looking to pursue a career in commercial real estate investments?
I am a junior in high school and looking to pursue a career in commercial real estate investments. I am lost as far as what classes and degree majors to focus on in college. Also, after and during college where do I need to start that will lead to commercial investments? Is selling houses the only way to work my way up to commercial?
a; visit your local public library and take home 2-3 books on real estate investing and on
commercial real estate investing.
b; study investment math which includes returns on investment, cap rates, and
study lending rules and practices
c; you need study nothing regarding residential [houses/apts] to do commercial
investing.
tell your mom I am writing to you; it is unethical for me to respond to you without
your mom-dad knowing about it
[get a degree in finance and one in real estate]
References :
RE broker
Hello Shayla, The best you can do is to search in colleges in your community that offers advanced subjects in real estate courses. Since you are still in junior high, you can start reading articles online, Try this site to get stated, http://www.real-estate-investing.com . But most importantly, ask experts in forums and discussion boards. A lot of helpful people in real estate investments.
I hope this helps. Good luck
References :
There are accredited degrees for real estate at the college level you should take.
References :
You will have hard labor & increase your concept about real estate industries. But no worry, if u have capability & determination to that one you can become a famous in this field. Carry on.
Best of Luck!
References :
http://www.tarncourt.com/