When it comes to buying properties for profit there are a lot of things you need to consider – the market, the expenses, the state of the property, and the time needed to make a return on investment (ROI). All of these are influenced differently and they will be the make or break of the investor.
As you already know there are several types of properties you can invest in and all of them are different and make different ROIs. As you can see, we are discussing commercial properties and within them, we will be discussing which ones will be the best ones to invest in if you are an individual investor.
The list of these is not that long and truth be told several real estates fall into the category of most profitable for individual investors. Today we will talk to you about that and we will explain things like why invest in these, what is the sweet spot for investment and some of the pros and cons of these.
If you are the one that is thinking about investing in commercial property, or you have already invested and hasn’t worked out and you don’t know why then this article is for you. to learn something, read the article through and try and visit the best at this in Cape coral commercial property for sale.
Apartments
What goes under the apartment’s category in commercial business? If there are five units or greater that property is considered to be an apartment unit while four-plex, tri-plex and duplex are considered residential buildings so make sure you got that straight.
Why invest? Starting from the most obvious reason – everyone needs a place to live. This means that the demand for these properties is great and the ability to make a quick ROI. The cash flow generation on these properties is quick and uses tricks like increasing appreciation by raising rents and reducing expenses.
The resulting form is you will improve your bottom line which will in return increase your property value. Another thing that is important to note here is that the apartments will reduce your principal as you make the mortgage payments which means you are creating equity.
When it comes to the sweet spot of getting into the apartments business it is anywhere between half a million and 5 million USD, but again it will depend on the current market and the offer.
Anything below half a million isn’t worth getting into and anything above 5 million is too risky because this is the territory of the big dogs and you as an individual investor don’t need that.
As far as pros and cons go the biggest con to this is having contractors and other investors building a new apartment complex next to you because that affects your ability to attract and rent to new tenants. Some of the pros have already been mentioned so we will skip them.
Self-storage
These are commercial buildings with individual spaces where people store their stuff. Now we all know that these are highly sought after because of the number of things we collect over the years and the lack of space, especially with people living in apartments.
The reason why you would want to invest in a self-storage business is almost as identical as in apartments with the lack of two things that go to your advantage. One is that you have no tenants and the other is investing in repairs you have with apartment buildings. These create a lot of cash flow and with these, you can also force appreciation just like with apartments.
The sweet spot for you to get into the self-storage business is calculated a bit differently. What you want here is to buy a large enough self-storage business where you need to employ a property manager by law.
Pros and cons are clear, some pros we already mentioned and the ones we haven’t been are that this is not labour intensive, low maintenance, recession proof business and if you have people that are not paying for the lease you can take their stuff and sell it too recoup what is yours.
As far as cons go you need to watch out for the neighbourhood you are getting into because no one would store their stuff in a bad one the other con is that it sometimes takes time to occupy all of your units, so patience is a key here.
Office buildings
This can be a single building with one tenant to a skyscraper that is 50 floors filled with different tenants. But why are these so good for investing in? Well, when the economy is booming the rates on office buildings are astronomical and there isn’t a single soul that will hackle you for the rate you are charging.
You do need to invest a bit to get yourself an office building but it all pays out long-term, and you need a good year or two before you are set for the next investment.
The sweet spot for investing here is advice to start small and where you will find an office building with multiple tenants with long-term leases. When you get enough cash flow and when you make your ROI then you can move to the next one that is bigger and more complex, and so on.
As far as cons go with office buildings you will have problems with a bad economy because as they follow the good on and rack in more income, they also follow the economy in the fall where you will need to lower leases to keep your tenants.
Also, try to avoid those classy type-A office buildings because you will be stepping on toes there and you will be fighting the big dogs there because they are the ones looking for those types of office buildings and they are making them way overpriced for a smaller individual investor.
So, as you can see this list isn’t that long but it has three of the most familiar and most profitable commercial properties you can sink your teeth into and start making money.
Like everywhere else there are some things you need to pay attention to and if you follow what we wrote about we believe that you will not make any bad decisions and investments. Best of luck to you all.
