Commercial Real Estate Profits – Why Investors Should Be Looking At Multi-Units
However, the Real Estate market is a volatile animal lately. Another thing that I know about investors is that most would like to avoid volatile situations.
The "Subprime Meltdown" threw everyone in this industry for a loop! All of a sudden, there was a large population of homebuyers that were no longer approved for financing. This shrunk the pool of homebuyers in the blink of an eye. Realtors had less people that they could show homes. Home sellers had less people to bid their prices up. Houses are sitting on the market for much longer than normal. The next logical step is a sharp decline in home values.
This is where an investor looks for the opportunity rather than sulking with the crowd. We understand that there are much less homebuyers now than just a few months ago. The smart investor asks, "Where did these people go?" The answer is: they must continue renting!
Well, what happens now? In the rental market you have constant turnover. People become renters and renters become homeowners. Now that less people are becoming homeowners, you have an oversized pool of renters. They compete and increase the average rents.
Opportunities abound! Owners of Commercial real estate properties (such as Multi-unit apartment complexes) are reaping rewards in the form of large profits. They are able to increase their rents to realize immediate profits. They also have more possible renters to choose from when reviewing applications. They are better able to choose reliable renters that will pay their rent. They no longer have to settle for deadbeats to fill their vacancies.
Many investors have steered clear from Commercial Real Estate because of the initial investment required. Most banks will require a borrower to put 20% to 30% down on a property before even thinking about lending to you. They also pour over your financial records for with a fine-tooth comb as your loan is passed through their committee of decision-makers. This is why smart investors have been creating partnerships with mortgage professionals.
With recent Commercial Lending guideline changes, it is now possible to secure 90% financing for a Commercial Multi-unit property. Only 10% down payment is required! The loan is based on the income of the property, not your personal income. You can leave your 1040's and the other 40-some pages of tax returns at home.
Commercial properties are also harder to sell than residential ones. There are simply many more buyers of single family home than there are investors interested in commercial properties. For that reason, these properties have stayed on the market longer and have decreased in sales price. An investor sees this as an opportunity to purchase a property below value to realize an immediate profit in the form of equity.
With so many reasons, it pays to take a look at becoming a Commercial Real Estate Investor. The current Real Estate market is primed for profit if you just know where to find it. Partnering with a knowledgeable mortgage professional could be your first step to wealth.