Are you considering investing in real estate? If so then you’ll need to decide on whether or not you want to deal with residential properties or commercial real estate. Although the average person will typically think of investing in residential homes, there are a number of advantages to getting involved with commercial property. This type of investing means buying office buildings, industrial buildings, retail buildings, apartment buildings, and other similar investments. Here we will take a look at how to invest in commercial real estate with no money.
Pros For Commercial Real Estate Investing
1. Easier To Determine Property Value
It’s often easier to determine the real value of a commercial property because the current owner will often have records and income statements that play a factor in determining the price. The asking price is often based on the prevailing cap rate and the type of property such as whether or not its industrial, retail, or office space.
2. Greater Income Potential
Commercial properties almost always have a bigger potential for income than residential ones do. It is very common for these types of purchases to have anywhere from 5% to 15% annual return whereas residential properties are often 1% to 4% at best.
3. Owner And Tenants Have More Professional Relationships
Tenants of commercial properties are businessmen and women just as the owner of those properties are. They also have a vested interest in keeping a professional business location. This means that the owner and the tenant will more easily work together in a professional or business manor then would be the case when you’re dealing with the tenant of a residential property.
4. Fewer Upkeep Cost
Commercial leases often allow the owner to maintain fewer aspects of the property. Those leasing can even sometimes cover taxes on the property. Large brands like Starbucks, CVS and nexa will commonly lease properties and take over all the maintenance because they want to maintain the look and feel of their brand.
5. Increased Flexibility Of Leasing Terms
With residential property, there are a number of strict consumer protection laws that don’t usually exist with commercial leases. The strict termination rules and deposit limits don’t typically exist on commercial real estate.
Cons For Commercial Real Estate Investing
When it comes to investing in real estate there are a lot of great reasons to choose commercial properties but there are a few cons or downsides to this type of investment. A commercial piece of property will usually be a larger investment often because of the sheer size of the property. An industrial complex or large shopping mall is going to be a bigger investment. If you’re doing traditional investing it will often mean that you’re putting a larger amount of money out of your pocket.
Because it is a commercial property it means that there are a lot of members of the public that come onto the property and this increases risks to those visitors. If someone were to get hurt and it was determined that the property owner was at fault then costs could be substantial. Even with natural causes such as ice and snow, there are still risks that the property owner can be held at fault for. All of that said, however, investing is inherently taking on and managing risks. Now that you understand the pros and cons of commercial real estate investing you may now be wondering if it’s possible to make this type of investment with no money.
Ways To Buy Commercial Property With No Money
Regardless of whether it’s residential or commercial property, it can be done with no money directly out of your pocket. It will mean searching for the right property and putting together the right offer to do so. If you structure an offer that is appealing to the seller then you will be able to make the investment. Here are some ways to invest with no money out of pocket.
Borrow The Money
The obvious solution to getting real estate with no money out of your pocket would be to simply borrow the purchase price. This eliminates the need to make a creative offer to the seller because you’re simply making an exchange of money which is what they want. This will require mortgaging the property and it may also be necessary to put up other collateral in order to get a large enough loan.
Negotiate A Lease With The Option To Buy
Very often an owner is anxious to get out from under any mortgage payment that they have and the best way to do that is to either sell the property or lease it. By offering the seller a lease with the option to buy it allows them to have you make the mortgage payment because you’re paying a monthly lease and it gives you the opportunity to build up part of the down payment on the property which makes it easier to get a loan for the additional amount.
A lease with the option to buy is very often a win-win solution for both the seller and the buyer. The seller will get a lease payment that covers the mortgage plus an additional amount above that. If at the end of the option the one leasing decides to buy then the added amount is applied toward the down payment. If the renter chooses not to buy at the end of the option then the seller is able to keep the added amount that was paid.
Find A Partner
There are those people that have money and that want to invest when there’s a good potential for return and because they bring money to the table they don’t want to have to put in any time or expertise into the management of the property. This is how you can gain that partner by offering your expertise in both managing the property and doing any type of maintenance that needs doing.
Investing in commercial real estate with no money out of your pocket is absolutely possible. It’s simply having the courage to look at how to make it happen and then getting it done. If it were super easy everyone would be doing it and there wouldn’t be any money in it, so the fact that it takes added effort and expertise is why there is lots of potential to profit doing this type of investing.
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