subject: Myths About Buying Commercial Investments [print this page] Buying commercial investments is something that people always warn potential investors about. Theyll say Well, unless you have a lot of money, its better to invest in residential real estate. But this is one common misconception about commercial real estate. You dont have to have a lot of money to invest; you just need to be smart about it and to invest in the right sector.
So, what are the other myths about commercial real estate?
The number one myth is that buying commercial investments and being successful in them cannot be done by ordinary people. Why not? First, they say that it takes a lot of money. Second, they say that it takes a business genius to pull it off. And third, well, they just say youre simply not qualified to do it.
But, why not? I say all it takes is someone whos determined and lots and lots of research and youll do fine. I was just an average employee when I stumbled upon self storage investment, which is one of the more stable sectors of commercial real estate, and I can say that I did good. Of course, I was very determined and I also did a lot of research before I ventured into it. And guess, what, banks love self storage and so I bought my first facility with very little cash. This is a prime example of how commercial real estate is definitely for ordinary people.
The second myth about commercial real estate is that when it comes to real estate investment, its better to invest in residential real estateespecially when youre a newbie. First, theyll say that the capital is a lot lower. Then, theyll say, well, the economy is bad now so nows the time to invest in residential real estate as houses are selling at a loss. And third, theyll say that well, even if the value goes down, at least you have a house.
Why is this thinking wrong and definitely a misconception? First off, banks are very cautious when handing out loans and they hate residential short sales. So, first, youll have trouble getting capital. Second, the market is currently saturated with residential brokers and itll take much effort for you to land a sale thats worth your money. And third, this is what the owners of houses that are selling at a loss were thinking when they bought their housebut when they need it the most, they cannot even get a return of their investment, losing hundreds of thousands of dollars in the process.
The third myth is that the best sector in commercial real estate is apartment complexes or multi-family homes. Believe me, this is definitely a myth because Ive been there. Its affected by a lot of factors that you really dont have any control over. For instance, I was already a millionaire with more than 20 apartment complexes when 9/11 hit and I almost went bankrupt. Its a very volatile market with a whopping 58% bank loan failure rate. This is why youll have a lot of trouble asking banks for loans when you state that youre buying an apartment complex.
So, whats the best sector then. Based on experience and lots of research, self storage investment is the best and safest bet during this time of economic recession. Banks love it because it has the lowest bank loan failure rate at only 8%! Whats more is that its unaffected by the recession because whether the economy is good or bad, people need a place to store their stuff! This is because us Americans are packrats by nature.
by: Betty Payne
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