If by comercial porperties you mean strip malls, office buildings, warehouses etc, these are usually pretty big ticket. So unless you are wealthy it is hard to get adequate diversification. Also, unless you know the business you can pretty easily get hammered. If you are still fairly young, consider working as a broker in the geographic and commercial industrial area that attracts you.Thinking about having commercial properties for my retirement.....what's the pros and cons about having this type of business?
G-95 said:I personally owned one SFH on my investment portfolio, it has a monthly positive cashflow. However, I attended a real estate investing seminar last year and got into their ideas of making BIG bucks through commercial properties. One thing that they said is that commercial properties have different ball game than residential properties, one advantage of making deals on commercial is that we, as individuals, don't need to be qualified on loans because in commercials, the property itself will have to be qualified on loans. Banks need to know how well the property can perform.....is this true?
Note: commercial properties they discussed are apartment complex/buildings, mobile homes lot, self storage buildings, etc.
If you are managing them yourselves, it ain't retirement.
I have not seen this to be the case. Most lenders want to make sure borrowers have "skin in the game" meaning money . Typically 20% min and are personally liable on the loan as well
jerome len said:A lot depends on economic conditions. Today, in most markets, the vacancy rate is about 15%. I just had coffee at Starbucks and 2 of the 4 spaces in that little commercial retail center are vacant. Most little shopping malls, commercial buildings, have a lot going on. If you don't know what you're doing, look for a building with a long term lease with a financially healthy client.....these don't up for sale very often. I own buildings and their a hassle, yes, the banks look at these based on cash flow BUT mortgage terms are far different. You have to look at depreciation, cost of money, and positive cash flow is far different then you might think.
The folks that I know that do well are and have been professional commercial investor/owners for a long time. It is a great business if you know what you are doing...if not, get an education ......you could get burnt.
Wrirya said:I have to agree, I own commercial and single family, I have also owned plex, The down side of commercial is vacancy, funny enough that can be an up side. In commercial you may go 1 year or more to find a tenant. That is a long time to go without income especially if you need it for day to day living, however once you get someone in commercial they stay for a long time typically. I am a big fan of single family homes and even a bigger fan of owning notes on single family homes, basically own the paper secured against the real estate.
G-95 said:Hello Wirrya,
Interesting ...
How do you own notes on SFH without owning the property itself? It probably more like partnership when one of investors just invest his/her money and name doesn't on property's title, correct?