Commercial Real Estate Investing: Five Ways to Make Money

Fundamentally, there are about five different ways to make money investing in commercial real estate. Each one should be considered a tool in every investor?s commercial real estate investment toolbox:

Strategy #1?Equity Buildup: Most people are familiar with the concept of increasing the equity in a property. Equity build-up is one of the key ways to make money in commercial real estate. It can be done four ways:

One is to initially buy the property below market value. This gives you immediate equity buildup. To do this successfully, it?s important to have done your ?due diligence? on your property, understand your buyer?s needs, as well be a skilled at negotiating.

The next way to build up equity is through appreciation of the property. This can easily be done if you are keeping the property in good repair and making sure that when you purchase the property, it is in an area that is growing. It?s value is bound to appreciate over time.

The third way to buildup equity is by paying down debt. The key to this strategy is to always strive to get the lowest interest rate possible on your mortgage or other debt instrument.

The fourth way to create equity is when it?s time to sell, invest the effort to sell at above market value. Again, knowing your prospective buyer, having access to critical information, and being skilled at negotiating can give you an immediate boost in equity.

Strategy #2?Depreciation: At tax time every year, you can receive an after-tax profit boost because the calculated depreciation is taken is taken as operational expense directly against your profits. There is one caveat however: You can depreciate the cost of the buildings, but not the cost of the land.

Strategy #3?Collect Rents: Getting the property to carry itself is the goal. But don?t stop there. You want the rents to not only cover the mortgage and ongoing maintenance and any major repairs - you also want the extra cashflow to perhaps pay down the debt to increase equity or fund another investment.

Strategy #4?Offer Attractive Financing: When it is time to sell the property, you can often negotiate a better deal for yourself when you offer attractive financing or more convenient terms to the potential buyer. For instance, a prospective buyer may be willing to pay a higher overall price if they don?t have to pay as much cash upfront.

Strategy #5?Add Significant Value to the Property: This is one of the most valuable ways to make money. When you add significant value to a property, you can often get a big boost in profits. Adding value can be done several different ways:

First, look at making strategic improvements. Making repairs is obvious, but also look for strategic improvements to make in the property. By strategic, we mean to concentrate only on those items that will raise the value by multiples of what they cost you.

Then, analyze whether there?s an opportunity to convert a higher and better use. When there is a higher and better use for the property, it can be worth substantially more. For instance, if you own raw land in the path of progress, you could get it converted to commercial zoning.

There is an old saying ?Buy by the yard, sell by the inch.? Applied to commercial real estate, it means breaking up a property can often increase the value. For example, you can buy raw land, turn it into a subdivision, and sell off the lots to independent developers to build on.

In summary, use this quick ?checklist? as a way to jumpstart your commercial real estate money-making creativity. It will give you some additional ways to make money you may not have thought of before.

Here?s the key takeaway: When investing in commercial property, a savvy investor will always factor in as many possible ways to make money into the investment as possible. Because that?s the name of the game?to make as much money in as many ways as you can, with the least out-of-pocket investment.

DSP Merrill Lynch beefs up India real estate investing

DSP Merrill Lynch has appointed Nipun Sahni director and head of India global commercial real estate. Sahni’s will be responsible for the firm’s real estate principal investments in the country, based in Mumbai.

Hemendra Kothari, chairman, DSP Merrill Lynch, says, “Nipun’s appointment is a strategic addition to our team and underscores our commitment to expanding our business lines in India. We look forward to capitalising on the many opportunities within the rapidly emerging real estate sector in the country.”

Timothy Grady, managing director and head of Pacific-Rim global commercial real estate, Merrill Lynch says “Nipun’s appointment significantly increases our bandwidth and footprint on the ground in India as we continue to roll out our commercial real estate investment platform in the country.”

India’s real estate market has attracted interest from a host of global players including Citigroup, Goldman Sachs, Morgan Stanley and others. With the Indian economy forecast to grow at 9% this year, real estate in the country is still considered undervalued. However, a huge run-up in asset prices over the last few years has made it critical to place bets carefully going forward.

Sahni joins from GE Commercial Finance in India, where he was country head of real estate. He has also worked with Ranbaxy. Sahni completed a masters in finance degree from the University of Delhi in 1994.

For more information on Real Estate Agents, MLS visit Propertiesmls.com

Source: IndiaRealEstateblog

About the Author

None

DSP Merrill Lynch beefs up India real estate investing

DSP Merrill Lynch has appointed Nipun Sahni director and head of India global commercial real estate. Sahni’s will be responsible for the firm’s real estate principal investments in the country, based in Mumbai.

Hemendra Kothari, chairman, DSP Merrill Lynch, says, “Nipun’s appointment is a strategic addition to our team and underscores our commitment to expanding our business lines in India. We look forward to capitalising on the many opportunities within the rapidly emerging real estate sector in the country.”

Timothy Grady, managing director and head of Pacific-Rim global commercial real estate, Merrill Lynch says “Nipun’s appointment significantly increases our bandwidth and footprint on the ground in India as we continue to roll out our commercial real estate investment platform in the country.”

India’s real estate market has attracted interest from a host of global players including Citigroup, Goldman Sachs, Morgan Stanley and others. With the Indian economy forecast to grow at 9% this year, real estate in the country is still considered undervalued. However, a huge run-up in asset prices over the last few years has made it critical to place bets carefully going forward.

Sahni joins from GE Commercial Finance in India, where he was country head of real estate. He has also worked with Ranbaxy. Sahni completed a masters in finance degree from the University of Delhi in 1994.

For more information on Real Estate Agents, MLS visit Propertiesmls.com

Source: IndiaRealEstateblog

About the Author

None

DSP Merrill Lynch beefs up India real estate investing

DSP Merrill Lynch has appointed Nipun Sahni director and head of India global commercial real estate. Sahni’s will be responsible for the firm’s real estate principal investments in the country, based in Mumbai.

Hemendra Kothari, chairman, DSP Merrill Lynch, says, “Nipun’s appointment is a strategic addition to our team and underscores our commitment to expanding our business lines in India. We look forward to capitalising on the many opportunities within the rapidly emerging real estate sector in the country.”

Timothy Grady, managing director and head of Pacific-Rim global commercial real estate, Merrill Lynch says “Nipun’s appointment significantly increases our bandwidth and footprint on the ground in India as we continue to roll out our commercial real estate investment platform in the country.”

India’s real estate market has attracted interest from a host of global players including Citigroup, Goldman Sachs, Morgan Stanley and others. With the Indian economy forecast to grow at 9% this year, real estate in the country is still considered undervalued. However, a huge run-up in asset prices over the last few years has made it critical to place bets carefully going forward.

Sahni joins from GE Commercial Finance in India, where he was country head of real estate. He has also worked with Ranbaxy. Sahni completed a masters in finance degree from the University of Delhi in 1994.

For more information on Real Estate Agents, MLS visit Propertiesmls.com

Source: IndiaRealEstateblog

About the Author

None

DSP Merrill Lynch beefs up India real estate investing

DSP Merrill Lynch has appointed Nipun Sahni director and head of India global commercial real estate. Sahni’s will be responsible for the firm’s real estate principal investments in the country, based in Mumbai.

Hemendra Kothari, chairman, DSP Merrill Lynch, says, “Nipun’s appointment is a strategic addition to our team and underscores our commitment to expanding our business lines in India. We look forward to capitalising on the many opportunities within the rapidly emerging real estate sector in the country.”

Timothy Grady, managing director and head of Pacific-Rim global commercial real estate, Merrill Lynch says “Nipun’s appointment significantly increases our bandwidth and footprint on the ground in India as we continue to roll out our commercial real estate investment platform in the country.”

India’s real estate market has attracted interest from a host of global players including Citigroup, Goldman Sachs, Morgan Stanley and others. With the Indian economy forecast to grow at 9% this year, real estate in the country is still considered undervalued. However, a huge run-up in asset prices over the last few years has made it critical to place bets carefully going forward.

Sahni joins from GE Commercial Finance in India, where he was country head of real estate. He has also worked with Ranbaxy. Sahni completed a masters in finance degree from the University of Delhi in 1994.

For more information on Real Estate Agents, MLS visit Propertiesmls.com

Source: IndiaRealEstateblog

About the Author

None

Real Estate Investing - Residential or Commercial?

Some real estate investment advisors believe that if you are just beginning real estate investing you should avoid commercial real estate, such as office buildings, shopping centers, and warehouses for the following reasons:

It’s more complicated and does require a greater knowledge of law, zoning and leasing regulations, financing etc. Residential apartment buildings also fall into this category even though they’re used as residential property for the tenants it’s still a commercial enterprise for the investor and since it is a multi-tenant commercial building on land zoned for that purpose it will differ greatly from residential property in it’s maintaining, leasing, valuing, financing, and a host of other things.

According to a study in The Economist, residential property investment was $48 trillion and commercial real estate investment was $14 trillion. There are a lot more potential renters in the residential market than in the commercial one. During economic recessions which can occur every 5 to 10 years, marginal businesses fail at a faster rate. This can mean negative cash flow for you because of high vacancy rates if your tenants are included in these volatile businesses. Although residential rental demand also goes through these cycles, there is always a greater number of potential renters for house and condos than there is for commercial properties.

The profitability rewards are bigger but so is the learning curve. Mortgages are structured differently and building insurance is more expensive. Also to consider are the costs of fire suppression, security, and air-conditioning systems along with telephone and internet facilities.

Consider the right type of residential properties.
Location, price and condition. Do your research and find a property in an appreciating neighbourhood. Remember, properties appreciate for only two reasons: inflation and increased demand.

About 70% of Americans live in 3 bedroom dwellings so 3 or 4 bedroom houses or condos should be your target as they are the easiest to sell, the toughest to sell are 1 and 2 bedroom homes. Only consider properties that are in good condition also unless you want a job as a handyman. Fixer-uppers are only good if you have the extra time or are in the home remodeling business which then would make good sense.

Living in it or renting it?
When buying a property as a rental investment, stick to the lower end of the price spectrum. Rental properties should be about 20% lower than the average home price for an area. The best rental market is for moderately priced but attractive houses because if most renters could afford to buy, they would. The goal for rental properties should be for neutral to positive cash flow whereas the goal for a personal residence is affordable payments.

Choose a property with up to 4 units.
A duplex or fourplex can be a great investment because your tenants will be making your mortgage payments for you and you can live in one of the suites. Now some investors will say this is not a good idea and they would never do it because the tenants would always be bothering them for something. I have done this with great success and without any headaches. You just need to make sure everything is kept up and you need to have a good read for people that you allow to be your tenants. So, up to 4 units is great but anything over that starts to get a bit hectic and closer to the commercial side of investing, which for the novice, isn’t recommended.

Commercial Real Estate Investing: Five Ways to Make Money

Fundamentally, there are about five different ways to make money investing in commercial real estate. Each one should be considered a tool in every investor?s commercial real estate investment toolbox:

Strategy #1?Equity Buildup: Most people are familiar with the concept of increasing the equity in a property. Equity build-up is one of the key ways to make money in commercial real estate. It can be done four ways:

One is to initially buy the property below market value. This gives you immediate equity buildup. To do this successfully, it?s important to have done your ?due diligence? on your property, understand your buyer?s needs, as well be a skilled at negotiating.

The next way to build up equity is through appreciation of the property. This can easily be done if you are keeping the property in good repair and making sure that when you purchase the property, it is in an area that is growing. It?s value is bound to appreciate over time.

The third way to buildup equity is by paying down debt. The key to this strategy is to always strive to get the lowest interest rate possible on your mortgage or other debt instrument.

The fourth way to create equity is when it?s time to sell, invest the effort to sell at above market value. Again, knowing your prospective buyer, having access to critical information, and being skilled at negotiating can give you an immediate boost in equity.

Strategy #2?Depreciation: At tax time every year, you can receive an after-tax profit boost because the calculated depreciation is taken is taken as operational expense directly against your profits. There is one caveat however: You can depreciate the cost of the buildings, but not the cost of the land.

Strategy #3?Collect Rents: Getting the property to carry itself is the goal. But don?t stop there. You want the rents to not only cover the mortgage and ongoing maintenance and any major repairs - you also want the extra cashflow to perhaps pay down the debt to increase equity or fund another investment.

Strategy #4?Offer Attractive Financing: When it is time to sell the property, you can often negotiate a better deal for yourself when you offer attractive financing or more convenient terms to the potential buyer. For instance, a prospective buyer may be willing to pay a higher overall price if they don?t have to pay as much cash upfront.

Strategy #5?Add Significant Value to the Property: This is one of the most valuable ways to make money. When you add significant value to a property, you can often get a big boost in profits. Adding value can be done several different ways:

First, look at making strategic improvements. Making repairs is obvious, but also look for strategic improvements to make in the property. By strategic, we mean to concentrate only on those items that will raise the value by multiples of what they cost you.

Then, analyze whether there?s an opportunity to convert a higher and better use. When there is a higher and better use for the property, it can be worth substantially more. For instance, if you own raw land in the path of progress, you could get it converted to commercial zoning.

There is an old saying ?Buy by the yard, sell by the inch.? Applied to commercial real estate, it means breaking up a property can often increase the value. For example, you can buy raw land, turn it into a subdivision, and sell off the lots to independent developers to build on.

In summary, use this quick ?checklist? as a way to jumpstart your commercial real estate money-making creativity. It will give you some additional ways to make money you may not have thought of before.

Here?s the key takeaway: When investing in commercial property, a savvy investor will always factor in as many possible ways to make money into the investment as possible. Because that?s the name of the game?to make as much money in as many ways as you can, with the least out-of-pocket investment.