| People often ask me how I got started in
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| | fixtures, perhaps even adding some
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| commercial real estate, and I tell them
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| | ceiling fans - all relatively inexpensive
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| that it was a conscious decision for
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| | fix-ups. As a result, we can now raise
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| me.Most people who begin investing in
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| | the rents by $50 per month per unit.
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| real estate start off with single family
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| | That's $600 more in annual income per
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| residential properties because that is
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| | unit times 10 units, or $6,000 more per
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| what they are most comfortable with. They
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| | year total (which will also recapture all
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| tell themselves, "All I need to do is a
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| | the costs of the fix-ups).Next, let's
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| couple of deals a month. I'll make myself
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| | decrease our expenses by $100 per month
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| five or ten thousand dollars, then at the
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| | by passing on a portion of the utilities
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| end of a very few months most of my
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| | to the tenants, or by doing some
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| problems will be taken care of." They do
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| | competitive shopping for our lawn-care
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| not really understand everything that is
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| | service and finding a company that does
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| involved in getting these properties
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| | the same great job for less money per
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| going.They think they are going to be
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| | month. Times 12 months, we've just saved
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| making big money, but before long,
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| | ourselves $1,200 per year.Total increase
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| oftentimes they end up with a lot of
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| | in annual income is $7,200 ($6,000 plus
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| problems and a lot of headaches. They
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| | $1,200). By increasing our income by
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| might have traded in their job for a
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| | $7,200 per year, we've increased the
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| perceived higher paying job, but find
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| | value of the property by $72,000 or more.
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| that it is really taking a toll on their
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| | That's the power of forced
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| lives.If you belong to a real estate
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| | appreciation.There are a lot of
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| investment group, take a look around you.
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| | strategies that you can use to force
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| Look at the people who have done
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| | appreciation and these are just some of
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| twenty-five to fifty houses or more. Are
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| | the simplest. But needless to say when
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| they living the life of their dreams?
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| | you're dealing with 10 units in one
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| More importantly, are they living the
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| | building, for instance in our small
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| life of your dreams? They may be better
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| | example, you've got an opportunity to
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| off than you are now, but is this really
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| | improve many things that will help you
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| what you want to work towards? I know so
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| | justify the increased rents. Also, you'll
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| many people who have a large portfolio of
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| | be seeing yourself dealing with a better
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| properties but really haven't achieved
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| | tenant mix. Higher quality properties
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| the type of freedom, success, and wealth
| |
| | tend to bring more stable tenants.PASSIVE
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| that they truly desire. How can you
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| | INCOME = FREEDOMAll of this leads us to
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| change this? In my opinion, the answer is
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| | the fifth reason why you should be
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| commercial real estate.WHY COMMERCIAL
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| | investing in commercial real estate and
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| REAL ESTATE?When I decided to start
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| | that is the passive income. Passive
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| investing in real estate, I stopped and
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| | income is the key to commercial real
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| took a look around. I realized that the
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| | estate. The way that commercial
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| people who were making the big money in
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| | properties are managed and the way they
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| real estate were the people who owned
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| | allow for a concentration of efforts lets
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| buildings not houses. People who owned
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| | you to put someone in place to manage
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| the large apartment buildings, the large
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| | those properties.In the beginning, on the
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| office buildings, the large warehouse and
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| | smaller 10-unit buildings, you'll
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| industrial space - those are the ones who
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| | probably need to manage them yourself.
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| really seemed to be living a lifestyle
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| | But as you climb your way up the ladder,
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| that I wanted.They didn't have to be
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| | and you start dealing with 20-units or
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| there tending to their properties; they
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| | above, you can then offer free rent on
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| had property managers who took care of
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| | one of the units to someone in return for
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| that for them. Yet, they were the ones
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| | managing the rest of the units for you.
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| spending the checks, catching planes to
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| | As we discussed earlier, even with 10
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| exotic locations and destinations, and
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| | units you can still make a monthly profit
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| living the lifestyle that I desired so
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| | if a couple of the units are vacant, so
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| much.After looking at this for quite a
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| | giving away one unit is certainly a small
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| while, I decided that there must be a way
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| | price to pay in return for the freedom it
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| of getting this done. They couldn't have
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| | gives you.Now you've got an on-site
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| been much smarter, have learned much
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| | building manager who handles all of the
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| more, or have had access to more
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| | tenant problems, tenant issues, tenant
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| resources then I could. Even though I
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| | improvements, cleaning, and trash removal
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| didn't know how immediately, I knew I
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| | - all in return for free rent in your two
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| could figure out a way to do it.I sat
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| | bedroom, $550-per-month unit. Usually
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| down and took the time to learn how to
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| | these people have other jobs, so you're
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| invest in commercial real estate, which
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| | not their sole source of income. If your
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| is what I would recommend that you do. I
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| | buildings are large enough to keep them
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| studied and figured out exactly what it
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| | busy full-time, however, you will
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| would take, and as I learned, commercial
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| | probably have to pay them an hourly wage
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| real estate became less and less of a
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| | in addition to the free rent, but that
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| mystery to me.How can you start? First of
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| | will only be a small portion of your
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| all, let's talk about why you would want
| |
| | total monthly profits.Meanwhile, all the
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| to do it.MORE CASH FLOWWhat are the
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| | checks come directly to you. You deposit
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| benefits of commercial real estate? First
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| | them, you pay the bills, you keep the
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| of all, one of the biggest benefits is
| |
| | difference - and believe me, that
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| that commercial real estate is valued
| |
| | difference can be substantial. Even on
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| differently. By "valued differently", I
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| | the small 10-unit buildings that we've
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| mean the amount of income that a property
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| | talked about, it's easy to generate
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| produces is directly proportionate to its
| |
| | $2,000 to $3,000 dollars per month in
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| worth. So if a property produces more
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| | positive cash flow, over and above your
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| income, then it is worth more. It has
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| | expenses. On larger, 20+ unit buildings,
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| very little to do with "market
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| | it's not difficult to create positive
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| comps".Second, along the way you are
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| | cash flows in excess of $5,000 to $10,000
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| going to get a far greater cash flow.
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| | per month if these properties are
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| Imagine if you were to buy a $250,000
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| | acquired properly. And since someone else
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| home. That $250,000 home may rent for
| |
| | is managing the properties for you, all
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| somewhere in the neighborhood of $1,500
| |
| | this money flows to you passively, while
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| per month. The underlying mortgage on
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| | you are spending time with your family,
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| that home may be somewhere between $1,000
| |
| | or traveling, or looking for exciting,
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| and $1,400 per month. So you end up
| |
| | new opportunities.Obviously there are
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| struggling to gain between $100 and $500
| |
| | many more great reasons to invest in
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| per month in positive cash flow. That's
| |
| | commercial real estate than these five
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| not a very high number for the amount of
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| | that I've given you - in fact, I could
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| work you have to put in, and it certainly
| |
| | easily list another thirty: cost
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| is not going to get you on the jet
| |
| | recovery, how it's financed, management
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| set.Now, let's take a look at a similar
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| | opportunities, scales of economy, and so
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| investment from a commercial standpoint.
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| | on.GETTING STARTEDSo, how do you get
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| That same $250,000 investment may end up
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| | started?Just as you would get started
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| yielding you an 10-unit apartment
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| | investing in residential real estate by
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| complex, based on $25,000 per unit to
| |
| | getting your education first (either "the
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| acquire the property.(Please note:
| |
| | easy way", through books and courses and
|
| Although these numbers work in MOST parts
| |
| | investor group meetings, or "the hard
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| of the country, I realize there are
| |
| | way", through the school of hard knocks),
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| certain high-priced areas, notably the
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| | the place to get started with commercial
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| west coast and parts of the northeast,
| |
| | real estate is by getting your education
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| where houses start in the $600,000+
| |
| | and learning the terminology. It's not
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| range, and $60,000 and up per unit is
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| | that different from residential real
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| much more common for apartments. Rest
| |
| | estate, and it's not that difficult to
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| assured that these concepts still work
| |
| | understand.Next, look around - see what's
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| 100% -- only the numbers, and the
| |
| | going on in your market place. Find
|
| PROFITS, are larger.)Let's say each of
| |
| | several small apartment, office, or
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| those units were two bedrooms, which
| |
| | retail buildings for sale, get the
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| could rent in most areas of the United
| |
| | financial information on them, and learn
|
| States anywhere between $400 and $600 per
| |
| | how they work - what they rent for, how
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| month. For simplicity's sake, let's use
| |
| | full they are, how the utilities are
|
| an average of $500 per month. At $500 per
| |
| | split up, what the expenses are, and so
|
| month times ten units, you're bringing in
| |
| | on. Start doing some "practice" deals -
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| $5,000 per month - more than double the
| |
| | go through the motions of buying the
|
| rent that you could expect to get from
| |
| | property with as much diligence as you
|
| that same $250,000 single family home.
| |
| | would if you were buying a single-family
|
| Your underlying mortgage payment would be
| |
| | home. Once you understand what the income
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| very similar to what you would expect on
| |
| | is and what the expenses are, you can
|
| a residential property; for this example,
| |
| | start to figure out how you would acquire
|
| let's use $1,400 per month.Your cash flow
| |
| | that property.The sooner you get this
|
| on this 10-unit apartment building will
| |
| | process going, the sooner I guarantee
|
| be $3,600 per month ($5,000 per month
| |
| | that you will be a commercial property
|
| income, minus a $1,400 mortgage payment).
| |
| | owner. Don't wait to get started - now is
|
| Now that will make a difference in just
| |
| | the time! This is the best commercial
|
| about anyone's life.LESS RISKThird, and
| |
| | market in the last 50 years. Properties
|
| most essentially, you're now spreading
| |
| | are available extremely inexpensively,
|
| out the risk over ten tenants, as opposed
| |
| | and there are many distressed properties
|
| to one. If your single-family home goes
| |
| | just waiting to be picked up with
|
| vacant, you're on the hook for the entire
| |
| | millions of dollars in equity in all of
|
| mortgage. Every penny of that mortgage,
| |
| | them. The bank rates right now for
|
| all of the maintenance, and everything
| |
| | commercial property are extremely low.
|
| that goes along with it is now your
| |
| | These factors combine to offer you an
|
| responsibility. If the house is vacant
| |
| | incredible opportunity. Do not let this
|
| for two months, you'd better be planning
| |
| | market place pass you by, or you may very
|
| on spending a minimum of $2,800 to cover
| |
| | well regret it.Can you imagine buying
|
| that mortgage plus miscellaneous expenses
| |
| | five 10-unit apartment buildings in the
|
| including maintenance, utilities, taxes,
| |
| | next 12 to 24 months? At the end of that
|
| and insurance. Potentially, you're
| |
| | time, you'd have 50 units, managed by
|
| looking at a very heavy negative cash
| |
| | someone else, and generating six figures
|
| flow.On the commercial property, however,
| |
| | of annual passive income. The exciting
|
| if one of your ten units goes vacant at
| |
| | part is that apartment buildings are just
|
| $500 per unit, you're still bringing in
| |
| | the tip of the iceberg, and in my
|
| $4,500. So you get slightly less positive
| |
| | opinion, not even my favorite
|
| cash flow but you're certainly not
| |
| | investments. I personally prefer office
|
| experiencing negative cash flow. Say
| |
| | and retail space which have a much higher
|
| three units go vacant - you're still
| |
| | profit potential. Apartment buildings are
|
| covering your mortgage and putting cash
| |
| | nice but office space and retail space
|
| in your pockets! Do you see how there is
| |
| | generate the really big money.I can
|
| actually LESS risk in commercial
| |
| | promise you that if you start following
|
| properties?INCREASE VALUE AT WILLThe
| |
| | these simple strategies, you'll generate
|
| fourth reason you should be investing in
| |
| | more than enough gold to fill up the pots
|
| commercial real estate is because of a
| |
| | for yourself as well as your family and
|
| concept called "forced appreciation".
| |
| | loved ones. The sooner you get started,
|
| Forced appreciation means doing things
| |
| | the sooner you'll see your first $1
|
| with your property that will increase
| |
| | Million profits!J. Scott Scheel has been
|
| your income and decrease your expenses.
| |
| | investing in commercial real estate for
|
| Remember that the more income your
| |
| | over seven years, and has created profits
|
| commercial property brings in, the more
| |
| | and equities of over $8 Million in
|
| it is worth.As an example, let's go back
| |
| | commercial property investments over the
|
| to our 10-unit apartment building. Let's
| |
| | last two years alone. He is successfully
|
| say we plan on improving the quality of
| |
| | teaching students across the country how
|
| each apartment unit by replacing the
| |
| | to make millions in commercial real
|
| flooring, upgrading to nicer doorknobs
| |
| | estate.
|
| and bathroom fixtures and lighting
| |
| |
|
