Commercial real-estate can be a confusing business, and if you are beginning to invest in real estate, you might consider avoiding commercial property altogether. While investing in commercial property is a bit more complicated than investing in residential property, there are some basic property types, prices ranges and general strategies that every commercial real estate investor should know.
Broadly speaking, there are three types of commercial real-estate you might consider purchasing. The first is multi-family housing (i.e., apartments), which is any form of accommodation with 5 or more units. The second class of properties are shopping centers, vacant storefronts or empty units in strip malls. The third class of properties are offices, and this property type is pretty self-explanatory There are of course other types of commercial real estate, but these are three classes an individual investor should consider.
There is no specific amount of loan for each property type, but as an individual investor, you should start small.
When it comes to multi-family investments, look for properties that are in the 500 k to 5 million dollar range. When it comes to both offices and shopping centers, your best bet at first is to start small and then scale up as you gain income and experience.
Shopping centers are capital intensive. Until you secure the right mix of tenants, your investment will not generate a whole lot of consistent income, so you don’t want to take out a massive loan at first. This same principle holds true for offices as well. Until you have a few long-term leases, you won’t likely see a steady stream of income from your investment, so start with a small loan.
Buying a large, expensive group of apartments, a massive storefront or a class A office building could mean you’ll be saddled with a loan you can’t afford. However, as you gain income and experience, you can then scale up and begin investing in larger commercial properties.
So start with a small loan and then scale up your investment efforts.
When it comes to Arizona commercial loans what is the best way to make money and generate a return from your investment?
Its simple, you want to build equity. An overarching theme when it comes to all types of commercial property is to increase profitability. By increasing the profitability of commercial property, its overall value increases, allowing you to build equity.
You can increase the profitability of commercial property by making improvements, increasing rents or cutting down on expenses wherever possible. This general strategy holds true for all three commercial property types. After you have built up enough equity in your investment, you can simply hold onto it, or you can pay off your loan either by refinancing or by reselling your property at a profit.
So commercial real-estate investment doesn’t have to be complicated. As individual investor you need to the consider the type of property, you need start small until you have a steady return from your investment and you need to increase the profitability of your Arizona Investment Property in order to build equity.
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Dennis Dahlberg Broker/RI/CEO
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22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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