- The Residential Real Estate Crash Has Arrived!
Remember when the bubble burst in the 1990s? The exact same thing has happened again and very noticeable in states like California, Nevada, Michigan, Ohio and Florida not to mention many others! And why did it happen? The real estate market is cyclical and it just went from peak to decline.
So now, how are you going to invest in this declining market? If you are an "average Joe" who has been looking at ways to invest in real estate, you have found that it is becoming one difficult task.
It's late at night, you flip on the TV and there he is telling you how easy it is to make money in real estate. You have Carleton Sheets, Dolf De Roos and many more who claim there is money in flipping and renting houses. The only problem is they fail to mention that there are certain points within the real estate cycle when you should invest and other times, where it would be taking on a big gamble.
- So What Aren't the Real Estate Gurus Telling You?
They failed to mention that residential real estate is cyclical and has a small window within the cycle in which you can make off like a bandit.
The housing decline is making it rather difficult to rent houses for profit.
They won’t tell you this, because then, you would not buy their program! And why would they want to tell you this? You are buying their program and making them rich!
These real estate gurus may know the secrets to making money in real estate but, the point is moot, as their goal is to sell as many books, videos and $3000 seminars as possible, not to tell you something that could take away from their sales!
So, you are now asking yourself, "Well, if residential real estate is in the decline, what type of real estate should I invest in?"
- The Answer: Buying Commercial Real Estate is Profitable at Any Point in the Market Cycle!
A client of mine from Los Angeles told me he recently purchased a good sized warehouse for about 1/4 of its value and had been renting out sections of this large warehouse to various businesses.
Now, you are thinking to yourself, "Oh look, he has the money to buy a large warehouse and how could I afford one?" Well, it cost probably a lot less than you are thinking. Is $200,000 affordable? Far cheaper than even houses in some parts of the country.
Basically, the company that was selling the warehouse wanted $800,000 and he low balled it and offered them about $240,000. This may sound like he just got lucky, however it is not an uncommon event to be able to get commerical property for a lot less than the asking price, as the market is wide open and selling a property can take a good deal of time, not counting other reasons such as needing the equity out of the property to purchase another, or someone inheriting it and just wanting to get rid of it (without often even knowing its value), zoning issues, owner retiring, health problems, divorce, etc.
They took his offer and since then, he has had multiple businesses rent space from him in the warehouse and he simply would section off the warehouse to the size specifications they needed and would clean up the area, build some walls and presto.
The amount of profit he was making from renting off sections of this warehouse were grossly high. Something you definitely would not expect. Mutiple thousands more a month in profit than what he was paying on the mortgage.
And the funny thing is, at the time, he still had MORE THAN HALF of the warehouse empty! How is it he is making so much money and even has potential for more?
- Commercial property is far more lucrative than residential homes. We are not talking double the profitability, but more like ten times the profitability! It all comes down to looking at the profit risk ratio. Is it worth the potential liability to buy and rent out/flip residential homes in this current declining market, where a $200,000 home may or may not net you $100 bucks? How about a tenant who can not pay? Why risk so much for a $100 a month, when commercial property can give you often ten times the profit? With residential real estate being in decline, it makes it all the more clear commercial real estate is the way to go!
- So why else is commercial real estate so great, besides the above?
- Reason One: The Amazing Cash Flow of an Apartment, Multi-Office Or Retail Buildings!
Buy yourself a standard residential property and you will be lucky to make a little profit, if any. Even if you buy a foreclosure or newly constructed homes, you will have difficulty, knowing that you have a lot of competition now doing the same thing.
The key is renting, not flipping, as the value of the property is using it as an asset for profit, rather than a commodity to sell.
However, renting a single home is not worth the risk 95% of the time. You have to look at the figures and consider the best and worst case scenerio and ask yourself, is the potential benefit of the best case worth the risk of the worst case scenerio? And considering the couple hundred you would POSSIBLY make, is it worth the potential liability of it going sour and you losing your renter or perhaps having to lower your rent a couple hundred in a recession? The goal here is not to pay the mortgage, but to make profit and I find it humorous when people rationalize to the point of thinking, "Well, I am almost paying the mortgage with my new tenant!" Now, how is that a good thing?
And what about the hassle and the occassional repair? Is it worth that couple hundred bucks a month?
And ask yourself, "What if I was doing just about the same amount of work, but had a multiple unit apartment building and make a few thousand a month, instead of a couple hundred? Its equivelant to getting a ten-fold salary increase. Just a bit more work, but ten or more times the amount of profit a month!
Ask yourself this question. Isn't it a no brainer? Of course, you might be thinking, "How could I afford the down payment?"
- Reason Two: With Almost No Competition in Commercial Real Estate, it Means More Deals for You and a Larger Profit Margin!
When is the last time you heard one of the "Real Estate Gurus" tell you to buy commercial real estate? Never, right? Its always courses on how to rent and/or flip residential housing. Not one of them ever discusses the profitability of investing in commercial real estate.
So what happens? Thousand upon thousands of newbie investers descend onto the residential housing market looking to make some quick money. The competition is so thick, you could slice it with a knife. They all just completed reviewing Carlton Sheets or some other guru's real estate course and they are all revved up to buy their first flip or rental.
OK, lets analyze this.. We have too much competition, many of them being newbies. And what do 'newbies' do? They make mistakes and what if they have not actually thoroughly crunched the numbers? Goodness, I think that makes for an impractical investment scenerio. Competition who don't even know what they are doing makes for less and less profitability in the market.
There is little to NO competition in buying commercial properties and gives you a wide open field of opportunity. And what I have learned over the last NINE years doing business is to NOT follow the crowd and INSTEAD find the overlooked investing opportunities like this, for there is where real wealth is made! Such opportunities as this are often overlooked, because people at first-glance just ASSUME it is too difficult or not profitable, without actually investigating the manner.
But, the secret is that is good for me and you. Why? Because that means less competition and our secret is safe as long as other investors continue to be in the dark about commercial real estate!
- Reason Three: When The Commercial Market Declines, You Still Win!
As Robert Kiyosaki says, Always make sure that you are going to succeed before you start anything. So that in the worst case or best case scenerio, you win and make profit.
And this applies quite well with commercial real estate seeing that you win whether the market declines or not!
Now, lets compare: Lets say you have a single family house and the market drops out underneath you, you can lose 1/4 of your equity in a couple month's time! But, with a commercial property, you will only lose a little equity but, as you will soon see, it will not matter. Why?
- Because those who rent from you are still paying you the same rent (whether we are talking an apartment or business space).
- Your mortgage will stay the same. So your monthly cash flow has not changed.
- And, since you will be able to pay off your mortgage much faster, you are able to borrow against the equity to purchase another building (as you are renting, not flipping). This means that by the time this slump comes around, your equity is already in another property and you did not lose anything!
- To top it off, you get to very nice tax write-off when you lose equity. So, losing equity is often something you look forward to when you rent commercial property, because of the tax savings.
- Reason Four: How to Buy Commercial Properties For As Little As 3% Down!
Ask About COMMERCIAL LOANS! Lending Money for your Investment Properties! Ask me about our UNHEARD OF 97% FINANCING---THE HIGHEST LOAN-TO-VALUE in the commercial marketplace!!!
Discover How Fast, Easy And Flexible Commercial Lending Can Be.
Unlike most bank loans, ours is a Stated Income/Asset Program. That means full document paperwork isn’t required – and you enjoy greater flexibility and faster turnaround times.
- No tax returns required
- No income verification
- Unrestricted cash-out
- Secured on commercial properties like multifamily, mixed use, warehouse, office, retail, industrial, automotive, special use and more
- Several affordable payment options
- Automatic payment options – no more writing checks
- Fixed or adjustable rates
- 15 to 30-year amortization
- Loans to corporations, partnerships, and trusts ok
