Commercial property is one of the best ways for you to take part in the American Dream, and turn it into financial security for you and your family. Income producing commercial real estate can bring in monthly and annual returns as well as long term appreciation.
Many first time investors make the mistake of using every penny of their savings to purchase their real estate. But, you must also have cash available for maintenance and upgrades.
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You also have to account for vacancy rates, which may or may not be high, depending on the condition of the commercial property you choose to purchase. There are also the costs of advertising your single-family and multifamily rentals to keep your occupancy rates high.
4 Tips for Your First Investment
Multifamily loans are really hot these days and you can leverage your investment with about 25% down payment assuming the income of the property is sufficient to service the debt. Although there isn’t a pre-qualification process as it is with home mortgages, you can start your loan by sharing your personal financial statements with lenders to make sure your liquidity and net worth to debt ratio is acceptable.
Once you identify the property, you can simply share the rent roll and expenses with the lender to get estimate for the loan amount. However, there are some rules you need to follow as a first time commercial property investor. Follow these three simple tips below to make sure you invest properly:
1. Start with Just One Single Commercial Property Investment
This is one of the best pieces of advice that can be given to a first time investor. As a beginner, your first investment will be a learning tool for you. You need to be able to give it your all. That’s why it’s wise to begin with just one single piece of investment property. Let’s take a look at how Donald Trump started. As you know, he’s probably the most famous commercial property investor in the US. When he first started, he didn’t begin with luxury casinos and hotels. His very first project was renovating an old, foreclosed apartment building. He purchased this one building and invested capital into renovating this one property. Once the project was complete, he filled his vacancies, and then he moved on to the next project. By following suit, you can someday become the high-level property investor that you aim to be. But, you need to start with just one to ensure that your multifamily mortgage is worth it.
2. Research Your Multifamily Real Estate Investment
A smart investor takes the time to do research. You need to ensure that the apartment building you invest in will be profitable for you. Your number one goal should be to see the highest return possible on this investment, in the quickest amount of time possible. Be sure that the rental property you get a multifamily mortgage on will bring in fair market rents that will cover monthly costs, with a substantial amount left over for cash flow. Also, for your first investment, make sure that the property won’t require too many upgrades or a lot of maintenance to make it livable by tenants willing to pay rental costs that are high enough for you to make profit. You don’t want every penny of that capital to be tied up in a property that you can’t rent out immediately for fair market rents.
3. Think “Long Term” Investment
First time commercial real estate investors aren’t necessarily the best candidates for “flipping” these properties. Multifamily property flipping is best left to those with experience, and a great deal of capital. Your first time investment should be something you plan to make a long-term profit from. Remember that this is a learning experience for you. You’ll need to put time and effort into learning the do’s and dont’s in order to see a valuable return on your investment, while paying off your multifamily mortgage loan.
Investment property brings more cash flow as time goes on. So, the idea is to keep it for years to come, and keep your rentals occupied. As you’re building your financial portfolio, stable cash flow will play a big part in deciding just how much you’re worth. By turning your long term investment into a stable cash flow, you’ll be able to show multifamily mortgage lenders that you have the collateral needed to get financing for your next commercial real estate property investment.
4. Use Roi’s List and Rocket Dollar
Closing multifamily deals has never been this simple!
Struggling to meet the right people to advance your real estate business?
With Roi’s List you can complete a deal in 3 easy steps:
1. Tell others what you’re looking for
Fill in your profile and tell people who your target audience is and what types of deals are you interested in.
2. Find investors based on your profile
Find the people who are really interested in a deal. We save you the hassle of trying to reach out to random investors and slowly building your network. Roi’s List is an instant black book for investors to do deals with whenever you need one.
3. Make a deal
With Roi’s List, it is easy to message anyone who is interested in making a deal. We fast-tracked the networking process so you don’t waste your time searching for potential investors. Make a deal with someone looking for exactly what you’ve got to offer. Then keep the momentum going and use your Rocket DOllar Self-Directed account to invest in the deal with checkbook control.
Multifamily Property Capital
Investing in multifamily rental property is a great idea if your goal is to create long term income for you, your children and generations to come. Staying focused on the end result is the best way to achieve your investment goals and create a steady income from your rentals.
Use tips and techniques that successful, experienced investors use to maximize your profits. And remember, you don’t have to be rich to buy multifamily real estate. All you need is the right multifamily mortgage lender to help you get started.