Beat the Crowd when Investing in Real Estate

We all are thinking about it and some of us are actually taking action and getting their hands on real estate investment properties. The longer the NY Stock Exchanges doesn't produce desirable returns the more people are starting with real estate investments.

For most of us the obvious choice of properties are single family homes. Although you can invest in real estate without owning a home, most people follow the experience they made while purchasing their own home. This is familiar ground and the learning curve for doing a real estate deal of this type is pretty slim.

Of course there's a drawback with this approach. The competition is fierce and there are markets where investors are artificially driving up the cost of the properties while completely discouraging first time home buyers. If this is the case, the burst of the real estate bubble is just a matter of time.

How do you avoid these situations and still successfully invest in real estate? How do you get ahead of the competition and be prepared for bad times in real estate investments as well? The only answer I have is commercial real estate.

Why commercial real estate you might ask? Commercial real estate is a solid investment in good and bad times of the local real estate market. The commercial real estate I'm referring to are multi unit apartment buildings.

Yes you will become a landlord and No you don't have to do the work by yourself. You are the owner and not the manager of the apartment building. The cost of owning and managing the building is part of your expenses and will be covered by the rent income.

Apartment buildings are considered commercial real estate if there are 5 or more units. To make the numbers work you should consider to either own multiple small apartment buildings or you should opt for bigger buildings. This will keep the expense to income ratio at a positive cash flow. Owning rental properties is all about positive cash flow.

With investing in single family homes it is easy to achieve positive cash flow. Even if your rent income doesn't cover your expenses 100%, the appreciation of the house will contribute to the positive cash flow. With commercial real estate the rules are different.

While single family homes are appraised by the value of recent sales of similar homes in your neighborhood, commercial real estate doesn't care about the value appreciation of other buildings. The value of the property is solely based on the rent income. To increase the value of a commercial real estate you need to find a way to increase the rent income. The formula on how this is calculated would be too much for this short article. I listed a few very helpful books where you can find all the details.

What's another advantage to invest in commercial real estate? Commercial real estate financing is completely different than financing a single family home. While financing a single family home you are at the mercy of lenders who want to make sure that you are in the position to pay for the house with your personal income. Commercial real estate financing is based in the properties ability to produce positive cash flow and to cover the financing cost.

After reading all these information about commercial real estate you want to go out there and dive into the deals. Not so fast. First, you need to learn as much about real estate as possible. In commercial real estate you're dealing with professionals. If you come across too much as a newbie you will waste these guys's time and your commercial real estate career ended before it actually started. Second, no commercial real estate lender will lend you any money if you can't show at least a little bit of real estate investment experience.

What's the solution to this? Go out there and do one or two single family home deals yourself. It doesn't matter if you make huge profits to start off with. Most newbie investors are loosing money on their first deal anyway. If you can manage to show positive cash flow with your single family home deals you are ahead of the pack.

My advice, buy a small single family home in a decent neighborhood and rent it immediately. This will keep your out of the pocket expenses at a minimum and you will have rent income to cover for your monthly expenses. Bonus, you gain experience as an investor and as a landlord.

Here's another observation I made during my real estate investment career. Most people like to analyze, learn, discuss and analyze some more. They never actually got to do a real estate deal. They love to talk about real estate investments, but never did it themselves.

My approach to real estate investment was simple.

- I bought some books about real estate investment.

- I read every single one of them.

- I put together a simple plan on how I want to get started.

- I started looking for properties.

- I bought my first investment property 30 days after I started reading my first book.

- I made positive cash flow with all of my properties so far.

What is my point? You have to go out there and practice what you've learned. The only valid credential in the real estate business is practical experience. Having a couple of deals under your belt, you can go out there and start looking at commercial real estate and even impress seasoned investors with your knowledge. Because you made this experience by yourself and you know what you're talking about.

Book reference for commercial real estate investments:

Gary W. Eldred, PhD: "Make Money with Small Income Properties"

Jack Cummings: "Real Estate Financing and Investment Manual"

You will find these books and many more on my real estate investment website at http://www.suncoastrenttoown.com/author_directory.htm

Sincerely,
Peter Dobler

Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Investor and a successful Internet business owner. Learn more about real estate investments at http://www.suncoastrenttoown.com or send a blank email to mailto:suncoastrenttoown@getresponse.com

---

Investing in Real Estate for Your Retirement (and Now!)

You've probably heard a lot of opposing information about Investing... Read More

I Believe God Wants Me To Tell All In Real Estate

After years of experience in the real estate industry I... Read More

Listing Real Estate Online - Top Tactics for Boosting Sales

Listing real estate online can be a great way to... Read More

Making Money In Real Estate - 10 Ways

Making money in real estate is an endless topic that... Read More

How to Buy Fixers for Profit

Do you dream of becoming a multi-millionaire real estate investor?... Read More

Minneapolis Warehouse Loft

Downtown Minneapolis is rich with true metropolitan charm. With the... Read More

Five Things to Help Sell Your Home Fast, and For More Money

Selling your home requires some thought and a clear plan... Read More

Lake Havasu Real Estate

Lake Havasu real estate is a hot commodity. With surrounding... Read More

Selling Your Home? A Warning About Attachments

Before you list you home for sale, determine what you... Read More

Home Owners: Disclose the Facts!

One of the most common causes for disputes occurring after... Read More

Industrial Income Property Financing: Part 3 of 3

Financial ConcernsOf the three types of income property, industrial property... Read More

How to Sell Your Home Without a Real Estate Agent

Considering the rapid rise in home prices over the past... Read More

Be A Realtor With Curb Appeal

Are you a realtor with curb appeal or are you... Read More

Should You Sell Before the Housing Bubble Pops

For the past several years housing prices have risen dramatically.... Read More

Will The Real Home Buying Guide... Please Stand Up?

Use Google right now and do a search on, "Home... Read More

How to Create Cash Flow Out of Thin Air!

Want to see a trick every real estate investor will... Read More

Realities of Real Estate Investing

If you are anything like me, you are always looking... Read More

The Great Real Estate Bubble Quiz

You hear it asked on the radio, in the newspapers... Read More

Buying a Home with Zero Down Payment in Irvine, CA

Years ago, the only person that could buy a home... Read More

The Bubble Effect

Turn on the TV at almost any time day or... Read More

Hey Landlord! Is Your Lease Legal?

The longer you are a landlord the more you strive... Read More

Real Estate Investing - House Problems

Houses can have lots of problemsReal estate investing requires expertise... Read More

Taxes When You Sell Your Home

What's the difference between death and taxes?Death doesn't change every... Read More

Cheap Homes For Sale In Great Towns

Good Homes Under $50,000? My wife Ana and... Read More

3 Top Real Estate Investing Methods for Maximum Wealth

Real Estate investing can be used to gain wealth in... Read More

Give Your Home A Timeless Feel

In the world of real estate, there is a huge... Read More

How Real Estate Investors Use Mortgage Note To Purchase Properties

Many of you may not be aware of the various... Read More

10 Tips to Sell Your House Faster!

Here are some Handy wee Tips to help you Sell... Read More

Dealing With Dual Real Estate Agents

Historically, real estate agents have represented the seller of a... Read More

Make Money As A Slumlord

Be a slumlord? Okay, I got your attention, now the... Read More

So, You Wanna Buy Pre-Foreclosures?

So you wanna buy pre-foreclosures? or at the courthouse steps?... Read More

Do Open Houses Work?

What are the odds that you'll find your dream at... Read More

Are You Profiting From O.P.P.?

Are you profiting from O.P.P.? If not, why not? We... Read More