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Beginners Real Estate Investing Guide
Real Estate Investing - Ask
Questions Before Making an Investment
First Time Real Estate
Investor
Real Estate Investing - Planning
Your Investment Strategy
How to Find Real Estate
Investment Properties
Getting a Professional Home
Inspection
Large Profits From Inexpensive
Real Estate Repairs
Real Estate Investing - Costs
and Fees
Real Estate Insurance
and Risk Management
Real Estate Investment Risk
Part 1
Real Estate Investment Risk
Part 2
Getting The Best Return For
Your Investment
Creative Financing
For Real Estate Investors
Real Estate Investment Tax
Considerations
Real Estate Rental Properties
- Great Investment or Nightmare
Real Estate Foreclosures - Great
Deal or Headache
Flipping Real Estate for Profits
Slow Return On Real Estate
Investments
Negotiating for the Best Possible Real Estate
Deals
Real Estate - A Time to Buy and a Time
to Sell
Creating Your Real Estate
Investment Strategy
Investing and Growing
Your Real Estate Portfolio
Commercial Real Estate
Investing
Real Estate Marketing
Understanding Real Estate Law
Do You Need An Real Estate Agent?
What The Real Estate Mortgage
Lender Sees
Do You Have A Career In Real
Estate?
Rural or Urban Real Estate
Investments?
Real Estate Investing on the
Internet
Real Estate Investing
- Property or Paper? |
Real Estate Investing - Introduction
Real Estate Investing - Commercial Real Estate Investing
According to recent reports, there seems to be more money invested in residential
real estate, and less commercial real estate investments made. In fact, the
difference is $48 trillion for residential investment, and only $14 trillion
for commercial investments. However, investing in commercial real estate
can be a great deal more complicated than investing in residential property,
which may account for the vast difference.
Unlike other types of investments, such as stocks and bonds, the value of
a property is directly affected by the market around it. For instance, if
the economy is bad in a specific area, the value of the property in that
area drops dramatically - simply because the rule is that something is only
really worth what others are willing to pay for it.
The economy, and the real estate market in a specific area in general, affects
how a property's value is appraised, how it is sold, how it is used, and
how it is purchased. Residential property is intended to be used by private
people, even though one in every four residential property purchases are
made by investors. Commercial property, however, is meant to be used for
business purposes or activities.
A single family home may be an investment by someone that intends to rent
the property out, but in terms of a large apartment complex, the investment
may be considered a commercial real estate investment - even though the property
will be used by private individuals as residences. How property is zoned
also affects its value. For instance, a commercial office building must be
built on land that is zoned for such a building.
The way a property is zoned affects how it is used, the value of the property,
how a property may be financed, and many other considerations. Investing
in commercial property usually costs a great deal more than investing in
residential property. Before one can invest in commercial property, one must
have the best possible credit. You must also estimate the Gross Rent Multiplier
(GRM) and the capitalization rate or cap rate before you can get financing.
The GRM is determined by dividing the purchase price by the monthly operating
income. The cap rate is determined by dividing the annual operating income
by the purchase price. Ideally, a commercial investment property should have
a cap rate of 10%. A potential financer, will look at the GRM, the cap rate,
the assessed value, the appraised value, the total income potential, and
more before making a determination. Investing in a commercial property is
more risky than investing in residential property, because while people will
always need a place to live, they may not be willing to open or relocate
businesses because of economic conditions.
When the economy lags, commercial buildings that were once filled to compacity
often become vacant. While the local economy is very important to commercial
interests, events worldwide also have a great effect as well.
Before investing in commercial property, you should have a good deal of knowledge
in the areas of real estate law, zoning, leasing regulations, maintenance,
finance, and more. Also note that with many commercial investments, changes
must be made to the structure to suit a tenant when they lease the property.
Commercial properties, unlike residential properties, often need more expensive
electrical systems, cooling and heating systems, telephone systems, and possibly
even more expensive plumbing considerations as well.
However, you can avoid the cost of making changes to suit tenants with a
triple-net lease. A triple-net lease requires the tenant to be responsible
for the expenses of making changes, for all maintenance and repairs, and
even for insurance that covers the property.
While there isn't as much money invested in commercial property worldwide,
it is a great deal more lucrative for those that do invest. The risks are
greater, but the return is often greater as well, and this is especially
so when the economy is sound. It may be a little more complicated, but that
added complication brings greater rewards and satisfaction!
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Beginners Real Estate Investing Articles
How to Advertise a Rental
Property
How to Build Equity
in any Real Estate Market
How to Find Motivated
Sellers
Developing a Profitable Real
Estate Investing Strategy
Bird Dogging: Getting Started in
Real Estate Investing
Buying Your First Home
Using Lease Options to Purchase Real
Estate
Real Estate Foreclosures
Increase Your Net Worth Through
Real Estate Investing
Interest Only Mortgages
Real Estate Investing
No Money Down Real Estate
Investing
The Power of the Lease Option
Real Estate Investing Tips
Real Estate Investments
Refinancing Your Mortgage
Loan
Paying Your Mortgage
Selling Your House without a
Realtor
"Subject To" Real Estate
Financing
Using Trusts as a Real Estate
Alternative
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