If you are a professional, busy making money for someone else while neglecting your own financial future, then this is for you! Discover how you can continue with your career AND create passive income and equity investing in commercial real estate.
It’s Not Too Late!
You don’t have to give up your career to invest in commercial real estate. You can invest in commercial property while working and benefit from the cashflow as your assets increase in value. To demonstrate how to create passive income investing in commercial real estate, here is an example deal:
12-Unit Apartment Complex
The property doesn’t have great curb appeal but it’s in a great location close to downtown. This is ideal because as an investor you want a C class property in a B class neighborhood. The goal here is to bring the property up to the standards of the neighborhood, raise the rents and increase the cashflow. Remember, you can change the property, but you can’t change the neighborhood.
Purchase Price
The apartment complex was purchased for $500,000. For 12 units that is $41,000 per unit. The average price in this B class neighborhood is $100,000 per unit so the property was significantly below market.
Forced Equity
The current rents are averaging $600 a month, which is $300 below market in the neighborhood. That’s great upside potential! By bringing the property up to the standards of comparable properties in the neighborhood, the rents can increase to $900 a month. With the increased cashflow, the NOI goes up which increases the property value.
The increase in rent and a higher NOI will take the price per unit up to $100,000 per unit, increasing the value of a 12-unit complex from $500,000 to $1.2 million. That’s the power of investing in commercial real estate!
Financing
This deal was financed with a loan through a traditional lender. The lender gave an 85% loan-to-value loan, meaning that the investor needed 15% as a down payment, and the loan covered the acquisition plus the renovation costs.
If you are an inexperienced busy professional, but have good credit and some down payment money, the key to getting a traditional bank loan is to create a good story for the property. When you show the banks how you can mitigate their risks, they are more likely to give you a loan. For this deal the story was a C class property in a B class neighborhood with lots of upside potential. The plan presented to the lender was to give the property a facelift with some cosmetic renovations, add 4 additional units to a vacant building that is already plumbed and wired, raise the rents to be comparable to the neighborhood, and as a result force the appreciation, doubling the value of the property.
3 Steps to Commercial Real Estate Investing for Busy Professionals:
- Take a moment to acknowledge that what you are doing today is not helping your reach your goal of securing your financial future.
- Find a new way of reaching your goals by learning commercial real estate. This can be achieved 3 ways.
You can download my free book , enroll in my free course Commercial Real Estate Investing for Beginners or join my Protege Program.
3. Take action.
