Do you currently own rental houses but are looking to learn how to upgrade from residential real estate and enter the commercial real estate industry? In this post, we’ll cover five reasons why you should upgrade to commercial real estate, as well as five how to steps to make it happen.
5 Reasons to Upgrade to Commercial Real Estate
There are many reasons investors should consider upgrading from residential real estate and invest in commercial real estate. In the past, we’ve covered why investing in multifamily developments is smarter than single family rentals, but we want to broaden the spectrum in this article. Here are the five reasons investors should upgrade from residential real estate investments to commercial real estate investments:
Stable Cash Flow
While investing in residential, single family, real estate does provide some cash flow, the risk is greater of that cash flow becoming interrupted. With commercial real estate, the cashflow is stable due and much higher than residential real estate. This is due in large part because income is sourced from multiple tenants rather than a single source. Combine that with typical low vacancy rates associated with commercial real estate, cash flow from commercial real estate investments becomes a stable, long term source of income.
Single Family Rentals Don't Provide Enough Income for Retirement
Investing in real estate is a great way to build wealth. Correction: Investing in commercial real estate is a great way to build wealth. Many people have achieved a wealthy, healthy, financial lifestyle through commercial real estate investing. While true many of people begin with investing in single family homes, what enabled them to grow their net worth and thus retire comfortably was commercial real estate development and investments.
Force Appreciation
With commercial real estate, we can force the value upward by simply raising the rents and raising the net operating income. You can’t do that with houses. With a single-family home, if you were to raise the rents, the value doesn’t go up. This is because the value of the home is determined by what other properties are selling for in your neighborhood. In commercial real estate, the value of a property is largely determined by the income generated at the property. Therefore, the higher the net operating income on your commercial property, the higher the value. So, if you’re good at managing your property, raising the rents and maintaining expenses, you can increase your wealth.
Consistent High Demand
Some of the most popular commercial real estate investments are apartment buildings, or what’s known as multifamily real estate investments. Looking at the landscape of nearby metro areas, Austin and San Antonio are poised to continue their population growth well into the next decade. This growth logically leads to higher demand for housing. With millennials not wanting to buy homes and seniors moving into smaller spaces, the need for apartments is greater than ever. All these trends are causing the apartment business to continue to boom.
One and Done...Maybe?
You may have heard it said before: One good commercial deal is all it may take to give you financial freedom. However, it is the art of finding that one deal that can lead to financial freedom. Commercial real estate developers in San Antonio and Austin, such as Casey Development, Ltd. have the experience and expertise in finding such deals!
5 Steps on How to Upgrade to Commercial Real Estate Investments from Residential Real Estate
Every commercial real estate investor needs to know the answer to their “why.” It is one of the most important questions commercial real estate investors should ask themselves. Understanding your why will help you upgrade from houses to commercial real estate.
Get Educated
For some of you, the rental that you’re considering selling or pulling money out of to do a commercial real estate deal is your life savings. You need to be very careful with that. Get educated and enlist the help of an experienced commercial real estate developer in Austin. Once you get educated and get an advisor, you can start to make knowledge-based decisions.
Calculate Your Money
Figure out how much of a down payment you have to invest in a commercial real estate property. If you were to sell your home or refinance it, how much do you have for a down payment? If you can pull out $250,000, then you could buy something north of $1 million in commercial property.
Focus on One Type of Commercial Asset
If you want to invest in apartments, study apartments. If you want to invest in mixed-use buildings, focus on mixed-use buildings. If you want to invest in office buildings, become an expert investing in office buildings. Whatever commercial real estate asset you choose, choose one and become the expert on it.
Surround Yourself with Experts
Michael Jordan wasn’t Michael Jordan until he had Scottie Pippen and Phil Jackson. Similarly, you need to surround yourself with talent. You need to build a solid team of advisors, agents, lenders, property managers, attorneys, and contractors. Teamwork makes the dream work.
Take Knowledge-based Action
After you have completed steps one through four, the fifth step is to take knowledge-based action. There is no higher form of learning than jumping into something and getting started, once you have one through four. Again, don’t do it by yourself. Get help and get educated.
Casey Development, Ltd: Commercial Real Estate Developers in Central Texas
Making the jump into commercial real estate investing can be intimidating. Overcome that fear by partnering with the experts in commercial real estate development in Central Texas, Casey Development, Ltd. Our team has the knowledge, expertise, experience, and tools at our disposal that allow investors, first timers or experienced ones, to invest their money in commercial properties that help build long term wealth and achieve financial goals. Contact our team today to learn more.