There are many investments that can prove to be beneficial for individual investors. There is no question that investing in real estate is one of these beneficial investments. However, Brian Fielding would like to make sure that investors do not limit themselves when it comes to the world of real estate. He knows that most individuals will assume that residential real estate is the best investment to make, but here the commercial real estate expert will share why commercial investments have advantages over residential reals estate purchases.
- Loans can be more flexible: Many who have purchased their own homes may find themselves familiar with the process of securing a residential loan. However, these investors must understand that when they are looking at commercial properties, there are actually many differences from commercial loans and their residential counterparts. Brian Fielding says that the loans on a commercial property tend to be more lenient than those for a house, and additionally a mix of loans and private money can be used to purchase commercial property as well.
- It is easy to evaluate the property: When it comes to determining the value of a commercial property, it is far easier than evaluating a residential property. The typical way to find the value of a piece of commercial property is to divide the gross income after operating costs by the desired return on the purchase, or the CAP rate. Unlike residential properties, a commercial property is not influenced by factors such as the quality of the local schools, or intangibles such as sentimental value.
- More options to upkeep the property: Brian Fielding shares that when an individual owns and rents a residential property, they often manage it themselves due to a limited income from the property. In the case of a commercial property like an office building or a multi-family apartment, it more likely that an owner will be able to hire a manager to help them maintain the building and attend to the tenants needs. This makes it easier for the owner to invest in multiple properties without a large time commitment.
Dear Mr. F.
One of your recent news releases suggested that investors might want to look at alternate assets such as towers on which companies can place their cellular equipment. My best friend owns a great piece of land that we think would be perfect for companies like Verizon and AT&T to rent. What do you think of the idea of us building a tower onto which companies can rent space?
Audrey S, Omaha, NE
It is important to remember that every industry has its experts and most people who think that they can outsmart those persons are likely to come out on the wrong end of a transaction. Wireless towers, whether monopoles, lattice or guyed are often built on sites that wireless engineers have selected. While there are exceptions, most are constructed by large firms that are expert in that business model and have strong relationships with the large cellular and other wireless firms.
There are exceptions and we are lucky enough to own a monopole that has colocation agreements [pretty much the equivalent of leases for commercial buildings] with some industry leaders and I can assure you that we were luckier than smart to happen upon a wireless tower that was sold to us well below market. Even with that positive experience, we recognize that we are relative novices in the tower industry and would likely not build an additional structure without commitments in hand from at least two of the major providers.
If you remain convinced that you have the perfect site [make certain to map out where competitive towers are within your community], you might wish to start out by going online to submit your site to the large cellular providers and see if they confirm your belief. If they show a sincere interest, we suggest that you hire a consultant to explain the relatively involved processes needed to gain approval [including environmental, geologic and historical studies] for this sort of venture.
Good luck … and keep us advised.
When investing in commercial real estate, there are a wide range of benefits that investors can enjoy from taking on this type of property shares Fielding Companies.
1. Diversifying Risk
People who invest in commercial real estate typically have a large portfolio of investments that they have made in several different industries. Commercial real estate investment is yet another asset that can help to diversify an investor’s risk in their investment portfolio.
2. More tenants equals less of a risk
For residential and retail real estate, losing a tenant can absolutely devastating with investors losing 50% or more of their income with a single person leaving their building. With all of the units that commercial real estate typically offers, there is a much less risk of a huge, devastating loss of tenants happening, thus the investor’s income is more secure.
3. Better protections for commercial real estate investors.
Tenant rights for residential tenants tend to be much stronger if a dispute does happen, because the courts tend to side with a person’s needs for housing and shelter. When it comes to commercial real estate, the courts have oftentimes favored the position of the investor over the tenant, yet another added benefit shares Fielding Companies.