Here are some of the experts you may consider contacting:. Identify the Right Property There are a number of factors to consider when looking for suitable commercial real estate to purchase.
The old adage "location, location, location" is true for commercial properties just as much as it is for residential. But there are other issues at play, as well. Here are some things to consider:. Do Due Diligence and Evaluate the Property After you locate the right property, you go to contract and commence a one- or two-month period during which you need to do your homework. Now is the time to revisit your objectives, and ask yourself if the property you have identified helps you meet or further your stated objectives.
Beyond that, this is where your team of trusted advisors plays an important role. A broker will often help bring in third parties -- engineers, appraisers, environmental analysts -- to help verify the condition of the property, its prior use, and any potential liability issues, whether structural soundness or necessary upgrades of electrical wiring.
You should also be involved to make sure that there isn't any potential for changes in adjacent properties that could negatively impact your business or property value, such as development, road or infrastructure construction, etc.
If you find any problems, you may have the opportunity to renegotiate with the seller or sometimes to walk away from the deal. Taking the Plunge and Making the Purchase Once you've found the right property and worked with the owner on the right price, the next big step is to secure financing and come up with the right mix of how much cash you're putting down and how much you need to finance, Nadji says.
During good economic times, there are a host of attractive financing options available to small and mid-sized businesses. After the global economic meltdown, starting in , banks tightened up credit and limited many of these options.
In order to get a loan during a tough economy, it's doubly important to make sure your business has sufficient cash reserves, has a good credit rating, and is profitable. Your attorney and accountant play key roles here to ensure contracts are sufficiently detailed, and structured to your maximum advantage.
You need to envision every possible contingency, and make sure it is covered -- clearly and unambiguously -- in the contract. Everything from air rights and other zoning laws to the nuances of existing tenant leases and tax requirements must be understood here. You also need to verify -- and re-verify -- the financial terms associated with this purchase, to confirm you are ready to pull the trigger.
At this step, you should also update or add to your original business plan, to cover the specifics of this acquisition; this is when your plan comes to life. Once the purchase takes place, it is imperative that you implement and execute on the plan without procrastination.
Before buying commercial real estate, it's important to make sure that buying is right for your business for the long-term. How to Pick a Site for Your Business. Pick a Location for Your Business http: Small Business Administration's small business planning guide offers advice on locating your business. You're about to be redirected We notice you're visiting us from a region where we have a local version of Inc.
Enter your email to reset your password. Or sign up using:. Sign in if you're already registered. Straight to Your Inbox. How to Purchase Commercial Real Estate. If you're thinking about purchasing office space, this guide will help you evaluate the pros and cons of leasing vs. Here are some of the potential risks a business faces when buying: Today's "hot" neighborhood can become tomorrow's "not" neighborhood.
The market may go bust. The area you choose one day may become undesirable the next. Of course, the reverse can be true, as well. Businesses may tie up much of their liquidity buying real estate.
It's not always easy to sell real estate, particularly in a slump. At the same time, businesses that own real estate at least have something to sell if they need a cash influx to revive a lagging business.
Tenants sometimes stop paying their rent. Do they need repairs? My Goal is 50 rental houses but here in California in the central valley areas.
I have 10 now 40 more to go and looking to accomplish by also. But no matter I will still go forward and face this challenge because I know opportunities and creativity will always there. Hi Vincent, Thanks for the comment. Keep searching and hopefully you will find one. Sometimes it takes developing a relationship with one as well before they giev you the really good terms.
What is the reasoning behind paying down the mortgage on some properties but then refinancing others? Hi Cody, I have stopped paying off mortgages for now. Before I would refinance houses that had the most equity, which would push out the loan ARM term. I would pay off the houses with the lowest loan balance. In essence I would benefit because the loan term on the refinances would be longer and I could take cash out.
The loan balances would be zero on other loans when I paid them off. If I had just saved cash flow and not refinanced, the loans could mature sooner and rates go up on the properties I would have refinanced.
Cool article, I thoroughly enjoyed it and I thank you for all the great free content. I will be buying my first rental property this year.
I am planning to use cash for the purchase, are there any benefits to that? I prefer to use loans and I discuss why here. Hello Mark, great plan and goal, wish you all the best, right now I have 10 rentals and I reached my limit from DTI ratio and from a residential loan limit, how do we keep going? A portfolio lender or one of the big finance funds. My goal since moving to Milwaukee WI is to own 40 rentals.
Still do not know how I will achieve it but 40 has been my goal, I am up to 4 now. Thanks for the article. BTW, I get at least 3 great turn key properties a month that I consider excellent deals, just ran out of capital to purchase them all under 30K.
Mark — great article. I own 17 SF homes in the Chicago area and would like to grow it to as well! I usually have a 60 percent or lower loan to value on them when i am done.
Your plan is very interesting and very inspiring. Through reading your plan I understand how you are paying off mortgages and getting more money for new investments but what are you living off of? Raising kids is expensive and I am just curious what you are using to fund your family? Do you still hold a job outside of this, or is it just more frugal living off money taken in from rent?
I appreciate you writing the article as it has answered many questions that I have held for a long time. I have a real estate team that sells houses and I flip houses as well. I definitely live off more than the rental income. Thank for you your encouraging articles. I just finished reading another one of your about good debt vs bad debt. In this article you say that you can use your cash flow to pay off other homes early. Can you elaborate why you would to do that instead on using that money for down payments on more homes?
Hi James, It all depends on your goals and how many properties you want to buy. Also depends on how easily you can get loans on many properties. I am very excited for you! I got into the real estate market after one random conversation with my friend back in I now own 13 units. I am only 26 and i feel like this has changed my life entirely.
Yes at times it drives me crazy and some tenants make you want to run for the hills at times, but thinking long term when they are paid off, that makes it all worth it. The process is hard but it is doable. I never really had anyone guide me but I have learned quite a few things and I still love to learn and hear from people who have done this at a greater scale.
I have done a few with hard money loan and then helocs but even that is getting a bit hard. Being in South Florida, the market here is getting hot again and prices are going up fast. I am currently trying to put some into a blanket loan. If you know someone or anyone here does that you recommend that would be great.
I feel like I have all of this equity tied to the houses but my cards are used for the repairs that were done on them. I would like to continue buying more and one day too reach ! Finally, what do you recommend for a property management company.
I can take it now but at times it gets crazy and I know eventually it will be unmanageable for one person. Here is a great article on property managers. Happy for your success. I would like to talk to you about reducing your Building Material costs on your rehabs for your rentals and your flips.
My problem is that I cannot find financing to continue adding to my portfolio. Also I believe my areas property values are starting to decrease. Detroit for example what would you do in my predicament? Is cash flow decreasing? If the entire areas future looks dim, maybe selling is an option. Thought I was the only one thinking big , want to buy rental properties at a specific period of time. If The Lord tarry I will get there. Realtor and Financial advisor. I felt it was written by me: Word by word it matches exactly my view on RE investments, financing, the aggressive goal or units even the timeline when you started investing in RE and how many properties you currently own and also the dollar amount that you are making through these rentals.
I wonder a lot of people like us started out in that time frame when the world was falling apart. Its becoming extremely hard to find those kind of bargains and my only concern is staying focused and avoiding value traps in order to have a aggressive but sustainable growth.
I have seen way too many people who started out good and then let go off their principles in order to grow faster and did not realize how investment environment around them changed.
On a constructive note, I see a lot of people who commented here are investors and therefor I would propose to create some sort of group where we can all discuss our experiences, resources and how the RE market is doing around the country.
Let me know if anyone interested. Hi RK, thank you! It is tougher for me to find deals as well. I can pay more because of rising values and rents, but I am still sticking to my guidelines. I have the forum on the site, but it is not used much. I would love to get that going.
I like your attitude and have no doubt you will reach your goal. My husband and I have had 52 rental units at a time but have owned many more. We had rentals for 25 years.
Also, some pitfalls to avoid. Mark, I want to be very clear on this please. I have not used a portfolio lender as of yet. I understand their rules are different and this is the only way i could do this transaction. Hard money purchase—Portfolio lender refi correct? Thanks again for you insights. I would talk to a new lender. From what the hard money lender told me he says he personally did this up to ten mortgages, after that he could not he refinanced with a traditional loan using Fannie Guidelines.
My portfolio lender would not do this because they require seasoning of a year. A Fannie Mae refi does not. This is a pretty advanced strategy and I doubt your lender has ever heard of it. A person might have to get a commercial blanket loan on the 10 properties and a higher interest rate then they could start financing rentals again once the 10 loans are paid off. They will just show as one commercial loan and conventional lenders are ok with that. Have you ever thought of investing out of state where you can get higher returns?
I am having similar problems. I am exploring options with a commercial blanket loan on my personal rental portfolio 10 SFR. I have 4 properties with mortgages, the rest are free and clear. Having 4 mortgages on investment properties prohibits me from purchasing All Cash and doing a full cash our refinance based on the new appraised value. I can of course, purchase up to 10 , 6 more with a min. Neither one of these scenarios really helps in my market. The last 4 investment purchases went like this; 1.
Purchased all cash 2. Clean up make rental market ready and acquire new tenants with lease. If I consolidate my portfolio with say 1st Key I will have 1 new loan at appox 5. This will open me up now on 4 more full cash out refinances, since my portfolio will now be out of my personal name or come up as a commercial.
The major problem is the market I am in. The upside is the value of my portfolio is very high, the down side is, I will continually need large amounts of money to make moves, and this is the problem I am having..
Mark, I am blown away with you home goal. I am very impressed and intrigued! I am feeling though, it will be very difficult if not impossible to achieve this type of goal in my market, without me making substantial income to keep purchasing or blindly investing in out of state where I know nothing..
I have TONS of equity! I have TONS of positive cash flow! But I am sort of stuck at the moment. They may be able to provide a blankey loan and free up much of that equity. Those taxes are crazy! I would also look into buying with hard money and then refinancing.
I have 2 great relationships with hard money lenders. Or will only be able to satisfy the existing hard money loan? I love these types of acquistions as I am purchasing well below market value, have the ablilty to rehab cheaply and quickly and although the taxes are high, the rent rolls are equally high.
Hi LEO, Correct you could only refinance the current loan amount, nothing more. Some hard money lenders will lend on repairs made as well as purchase price. I have never done this, but a hard money lender told me they do it all the time. Appriasal after purchase comes in at k.
My jaw nearly fell to the floor when I read your article. I feel somewhat alone in my run to financial freedom. My story is one made for Hollywood. Your plan is exactly to the frigging letter what my plan is. ONLY I take it to another level. Also, about thinking positive?! I am applying a strategy from the magic of thinking big book whereby I have a simple stylish enough of course bracelet that I put on my right wrist. The moment anything negative comes out of my mouth I must change it and put it on my right wrist.
I must continue this until I can go 21 straight days without uttering anything negative about anyone, anything, absolutely anything deemed a negative comment. I am moving mountains with my mind. My thinking is clear. I filter all the information I take in. I am more active I walk between 7 — 10 km daily. I am putting the final touches on my plan of action.
There needs to be a plan of action in place — a sound one I might add. But thank you infinitely for your words of wisdom — for such a young person. Thank you for the message Daniel! That is awesome you have made a transformation. I will see news on the tv once in a while and I have to turn it off, because it is all so negative. Sounds like you are on an awesome path! I will mention that this property goal is not the end or my biggest goal it is only part of the big picture.
I am constantly changing and adding new goals. I am guessing you did not see the recent Facebook post, but this gives you an idea of what I have been up to. Would you share with me on how you started a management company. I would like to do the same. Where are you located? I have 9 people on my team and I used a couple that are not completely busy to start talking to tenants and renting homes.
It worked good for me because they are already in the real estate field. You could always hire a Property manager as well. Hey Mark, Chris from NC here. I came across your site as I am interested in real estate and I truly enjoy reading your posts.
I commend you for showing people what you are doing and how you are actually doing it. It puts things into a manageable perspective and shows people how someone can do what they want if they put the work in and focus.
I too am a big believer in positive thinking and setting enormous goals. Your goal of owning rental properties is one of the major factors why I have subscribed as I want to see you succeed in achieving this monumental task. I have no doubt that you will succeed as it appears you have the right attitude and work ethic. Les Brown once said they he believes that the reason most people fail in life is not that they aim too high and miss, but that they aim too low and hit.
I firmly believe that and it appears with the size of your goal that you believe that as well. Also thank you for the informational tidbits on real estate investing aside from your goal. I own 0 but today I made a goal to buy my first income property in 6 months. Going to learn as much as I can starting now! Im in Ontario Canada by the way.
Good luck with your pursuit. I have acquired 19 properties in 28 years. Plus, equity in 9 real estate partnerships with apartments, strip malls, commercial property, storage lots and parking lots. Have made many contacts leading to equity in equipment leasing, property management, vending machines, record storage, Christmas tree farm, dried food and plastic bag businesses.
The best part, after years of trial and error and working hard and getting smart in the pursuit of building my little empire, I now have the freedom that plenty of cash flow provides. Hey Mark, thanks for posting. I started off purchasing my home and have it paid for. A good elderly friend of mine bought a rental property in and found a great renter. Well, as time would have it, he passed and I purchased the home for 30k. I barely raised their rent after all these years.
I figure a bird in the hand is better than two in the bush and besides, they never call me. I have that home paid for from the tenants over the last 5 years.
I own the house outright from the word go. One day I was visiting my mother when she told me of her neighbor selling their rental next door. I told her I was interested in it if I could buy it at a ridiculous price secondary to the age of the home and the fact that it was very small. It is a one bedroom. He was asking 20k for it. I prayed about it and told God his will be done. The gentleman sold me the house for the offered price.
I refinanced on my truck again. I think I still owed a bit on my last loan, somewhere in the 5k range. I still owe about a yr. So, that is where I am. My question is direction. Still runs great though. I saw a set of 2 quad plexes in the bigger city near by and am wondering about purchasing them. Can I purchase as owner occupant if I live in one of the units?
I imagine the interest rates would be better as well. What insights might you offer me in this situation? That would land me at k. If the seller agreed to that amt. I guess it all depends on the owner occupancy thing. That alone would cover most of the note. My question is how to maximize my income by playing my hand the best way. My only debt is my truck. Thanks for any input you might give. Hi Stacy, thank you for the comment and details!
Way to use your truck to buy houses! Have you asked the seller if he would consider any seller financing? Hi, because in my area single families cash flow better, have higher cap rates, I can get better deals on them and I can buy single families more quickly instead of having to build up my cash for a multifamily. I wrote an article on it called single family versus multifamily.
Hi Joe, The hardest part about getting started is saving for down payments. Do they have owner occupant loans in the UK with lower down payments? It would be tough to buy houses without a high paying job and being able to save a lot of money. Mark, I would like to buy more as well, however my wife is not on board.
I have two properties so far in a span of 9 years. I would love to have more, but need to sell my wife on it and figure out how to acquire them with no money down! How do you manage insurance costs, property management? My team manages the properties right now and I have had to switch insurance companies. The Keller way of thinking will get you there faster!!! Hi Joanne, was this comment directed to me or another commenter?
I am Mark, but no worries. I have read both Keller books the millionaire investor and the millionaire agent.
I have a couple of his other books on my list as well. I have never been with Keller Williams, but my wife was when I met her. There are actually no Keller Williams near by me. The one in Greeley closed a couple of years ago and the Loveland and Fort Collins offices were bought out be Coldwell Banker. Wow thats an aggressive goal. I have a goal of 4 SFH properties and 1 aprtmant building. Thank you, I started with smaller goals and they kept getting bigger as I accomplished the smaller ones.
My issue is dealing with the day to day problems of owning rentals. I am looking at using a property management Company. What are your thoughts in these companies? I know that their fees will reduce cash flow and slow the multiplier effect. I would like to turn real estate to a full time job, but for now I still need to work.
Thank you for you detailed plan. I would like to own rentals as a goal, but would like two have a mixed portfolio of residential and business properties. Sounds like you have a great plan. I started a property management company myself.
Once you get to a certain amount of properties it starts to take a lot of time to manage them all. Have you seen my article on finding a property manager? Can you help me find a portfolio lender in Philadelphia? I have 6 properties so far, and planning to buy my 7th. Because of my relationship with their officer, he would good enough to suggest that a portfolio lender would be my best source.
Hi Dan, have you seen this article? It includes my tips for finding a portfolio lender https: How would you manage rental?? Hey Mark Can you give me an advice for creative real estate finance? Hi dan, Yes Ben Leybovich has a program on creative finance. Hi Andy, I just purchased number 8!
Great article but a few questions…where and how do you decide to spread your risk. That would be very risky if the economy tanked or jobs moved elsewhere and your rents went down. For now I am investing close to where I am because I can manage them and I know the market and can buy them below market. I want properties that cash flow great. I look for high rent to purchase ratios in middle of the road price range.
You gave up on the garbage can too soon. It takes 2 weeks to learn a new habit. It might help you with other more important habits, like quitting smoking or losing weight, or thinking positively! Thank you for the advice. I do agree it takes time to create a new habbit and train your brain. Hey Mark, I find your drive and approach invigorating. My personal story… in early the market here in West Michigan was in the dump and I decided to buy a couple rental properties.
In the 3 years that followed I have added a total of 77 rental properties. They are all single family homes. Truth be told I only have 76 because I lost one in a fire 3.
Needless to say man this is not a quest for the weary. Shoot man in year I purchased and refurbed 28 properties alone, meaning I was having to go to a closing at least every 2 weeks that year. My average monthly rent is per month. I am in cash and have no loans on any of these properties. The crazy thing Mark is that the deals are vanishing and I am finding it hard to stop. Another thing I will mention is that I am not even to this day convinced I did the right thing going all in on these houses.
Sure I would like to get more — that part of me is real. The other aspect of it though is the repairs and headaches and extreme long term costs of holding all these single family homes. Shoot man in the next 15 years I better be ready to drop k on roof replacement alone. I have no idea how you expect to get the returns you are mentioning and what kind of long term expense ratios you are counting on.
I own them all in cash so I still do alright, but still these costs are staggering and real. What I have always tried to do is buy homes where the purchase price is not greater than 5 times annual rent… this is tough to do but really seals the deal on it being a safe long term investment. Anyways, I commend you on your quest. Thank you for the comment Ryan! That is impressive to have bought all of those properties so quickly.
I agree it can be overwhelming dealing with maintenance and expenses, that is why I like to buy newer homes if possible and stay away from homes over 40 years old for the most part. I also buy middle of the road single family homes, I think they tend to have less maintenance, turnover and repairs than the lower end rentals. One thing I know helps my expense ratio is taxes are very low here, we pay about. If you average out all of those roofs over 15 years, it really is not that expensive.
I do make a higher percentage return on my money having it leveraged over cash since I have less cash into each property. Thank you again for the comments and it will be interesting to see what the next 15 years are like for sure! I am in the process of starting a property management company right now which will reduce the work greatly.
I get much higher returns on the SFRs now then I can commercial in my area. Ryan, if you have them all paid you should not worry about k in repairs.. I dont know many people making that much money.. Jim Posey has the right idea. My first ten rentals took about 30 years thanks to two down markets and a divorce. My second ten took ten years. I am hoping my next ten take about five years. As you get more, they come quicker by using tax free exchanges, leverage and cash flow.
Thanks for posting this! Hi Jim Posey and all, I am a real estate newbie living in California trying to start out in real estate. Thank you for your time, AJ. Hi AJ, the best advice I can give is to learn from another agent. Find successful agents in your area and ask them if they need an assistant. Tell them you want to learn Real Estate from a great agent and their name kept popping up.
My wife and I purchased a little 6 plex apartment building 15 years ago. I did not really have a plan or goal at the time. But continued on buying a couple houses a year.
But then realized I could not keep up with all the needs of 13 units and do my day job also. Most of the loans we take have been on 15 year money. While still getting the cash flow. My new goal is now 1. Hi Jim, Awesome comment. I love hearing success stories! Like you said, who knows what will come along and what opportunities will present themselves. Mark, thanks a lot for your prompt reply! I did a lot buy-and-sell deals in the early investing years because of lack of initial capital.
It is hard to find positive cash-flow properties now. Sell some of the rental properties will bring me lots of cash for buying in other rental properties.
Refinance some of the rental properties will also bring me some additional cash for buying in other rental properties. However there will be negative cashflow for the refinanced properties. Some investors here are getting cautious right now and some are getting bold and make incredible high-price offer for deals. Is the situation the same as the market in in US? It is similar in some area of the US with multiple offers and prices rising.
They have not doubled in my area in five years, but there may be some areas that have seen close to that much appreciation in the last two to three years California. I would not invest in a long term rental if it had negative cash flow. I have talked to other investors in places like California, Boston and New York where prices are too high to cash flow. They invest in other states where the numbers make more sense. Do you think your local economy can support prices that high and people make enough money to afford those houses?
His newly created equity dollars keep compounding with each property he buys and sells. For buy-and-hold investers, they have to come up with a new down payment for each transaction because their equity is tied up in the property. They have no room to expend, grow and leverage, for a chance to put their equity to work. Thank you Scott, I actually wrote an article on how one of my rentals would have performed as a fix and flip. I actually do about 10 flips a year as well as the long-term rentals.
I use the income from the flips to buy more long term properties. There are some valid points that you need less capital when you continually buy and sell homes, but the expenses are much higher. When you sell you have to pay commissions and taxes on the profit, which takes away a huge chunk of the equity.
There are certain properties that work well as flips and ones that work better as rentals. I can refinance my rentals and have refinanced two of them so far, taking out over 50k total.
I was able to put that equity back to work buying more rentals and still having plenty of cash flow. I too have a goal of creating a large rental income but having those many houses and mot likely will be spread all over would be a nightmare to manage. My goal is to have 10, units by the end of the decade.
The only way I can accomplish that is through large apartment buys. Not to mention hiring a professional management company. Hi Jon, That sounds like a good plan as well. That would be a nightmare to manage properties on my own. Those that do come up for sale have worse cash flow figures than my SFRs.
I know it is different in every part of the country how multi unit cash flows compared to SFRs. I am a complete believer in everything you say in your article. You are very strong in your beliefs I have been following subconscious mind work since before even the secret came out….
Right now I am trying to find out how to get more listings from banks,,,any advice would be great, and I would love to find out more about your classes you teach on HUD homes. Keep up the good work with your plan. I know you will achieve your goal. Attending conferences is a great way to meet banks and asset management companies and to find out where the inventory is.
It is tough to get into those groups if you are new. Check to see if any local banks are selling REO in your area as they can be easy to get in with than the larger national banks. Here is a link to my guide for investors looking to bid on HUD Homes.
It has most of the info I teach in my classes. Most of my classes are tought locally, but I suppose if I got enough interest I could do a webinar. I love your focus and planning. It is so important that we have a dream, goals, a plan and focus, and you have them all. Currently I work in the hardmoney loan industry and one day I too plan on getting more properties!!
Rental Property Business Plan. This sample Rental Property Business Plan is free for you to download and use as a basis for developing your own specific business plan. How your local market is faring today – and if it makes more sense to buy or rent, to sell now or to hold off if possible – is largely determined by unique, local factors.
What does a property investment business plan look like? It certainly doesn't need to be spiral-bound pages of projections and fancy charts. In fact, the best plan would be so simple that it fits on the back of an index card – meaning that you can commit it to memory and use it to drive every decision you make.
Before buying commercial real estate, it's important to make sure that buying is right for your business for the long-term. "The most important thing is to think carefully about what could happen in the first 12 to 24 months after buying a building that would make you look back and say, 'I made a mistake,'" says Nadji. Like me, you probably have some kind of a goal related to real estate. Perhaps it’s something like: “Buy my first property” or “Own at least 10 rental units by the end of the year.”.
Writing your property development business plan is an essential part of setting up a development company and will form the foundation of your company. Buy to sell or buy to let; Project timescales; There are a lot more areas which can be included, but the list give you an idea of the types of questions and strategy which needs to be. My goal is to purchase rental properties by In this article I go over my plan, how I will buy houses, finance them and much more. Assumptions in my plan to purchase rental properties. I want to get into the rental property business like you have, and I’m just wondering if it’s a good idea to use my saved up cash from.