Many REI professionals begin their career with single-family homes that are more familiar than other types of properties. If you’re ready to move up to commercial properties, though, here are some tips to make it easier for you.
1. Don’t rush it. Because commercial financing takes longer than single-family financing, be prepared for the added time before the deal goes through. While you may be eager to settle the deal and get the paperwork completed, realize that it won’t happen as quickly as other deals and go with the flow.
If everything is in order, you’ve done your homework, and you’ve found the right property, the deal WILL go through. Just maybe not in the time frame you had hoped for. Be patient.
2. Go for broke. Well, not necessarily BROKE, but when you transition to commercial property investments, you may as well buy a 10 or 50-unit property as well as a 5-unit one. The more units you buy, the less expensive each unit is. And it takes just as much work for a small commercial loan as a big one.
3. Think outside the apartment box. While you may think “apartments” when you decide to go into commercial investments, there are other options. These include industrial spaces, mobile home parks, office buildings, vacant land, and more. If apartments don’t necessarily interest you, or you can’t find the property you want, consider some of your other options before settling for something you don’t really want.
4. Network. Building relationships in the commercial REI community can help you find the best deals and get them financed more quickly than going in cold without any connections. Get to know other investors and commercial land owners. Doing so will open doors to help you learn about properties before they’re even put on the market and may lead you to financial options you might not have been aware of otherwise.
5. Allow for a learning curve. While residential REI and commercial REI have a lot of commonalities, there are some differences between the two. Take the time you need to learn the ropes, become familiar with the language and understand the differences in the two investment arenas.
It will likely mean that it takes longer for your first deal or two to go through, but in the end you’ll have a better working knowledge of the industry and be better equipped to make the most money for your efforts.
Commercial investment properties offer REI professionals the opportunity to earn more money and get greater returns on every investment made. By following these simple tips you can make the transition into commercial investment much more smoothly and painlessly, which is always a worthy goal.
Can you get a commercial loan based upon performance of the asset or will your personal credit be subjecct to review. Thanks,
Hey Lisa, great question. Commercial loan guidelines have changed a lot in the last 5 years. Some banks will look at the asset performance *mostly*… but most banks we’ve come across today are also looking at the personal credit or the business credit of the person/entity taking the loan out. Lots of times community banks are willing to work more with smaller real estate investors… check some of them to see if they have programs that just look at the asset.