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If you’re like Dave, and you love investing in real estate, you may have considered adding commercial real estate investments to your portfolio. Commercial real estate takes more preparation, and can be more risky, but the potential payout can be worth it.
Start from a Strong Position
Commercial real estate investing is not the same as retirement investing. To start investing for retirement, you should be out of debt and have a fully funded emergency fund. Then you’re ready to put 15% o your income into mutual funds through your employer’s retirement account and/or a Roth IRA.
If you want to add commercial real estate investing to that, you need to be doing everything we mentioned above, plus have your kids’ college paid for and have the house paid off. Why? Because you don’t want to gamble the mortgage money or your kid’s college fund while you’re learning the commercial real estate business.
Local experts you can trust.Find an ELP
Dave does not treat commercial real estate investing differently when it comes to debt. Never go into debt for any type of investment. Debt compounds the risk and can lead you to make bad decisions.
Since you’ll be using cash, you’ll be looking at smaller properties for your initial investments. Maybe a single gas station as opposed to a strip mall, for example. As you build up your successes—and available cash—you’ll be able to make larger investments.
Bob Nance is one of Dave’s Endorsed Local Providers (ELPs) for commercial real estate in the Nashville area. He offers some insights for commercial real estate investors who are just getting started.
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Prepare for risk – Part of making money in real estate is protecting yourself from losing it. That means preparing for risks like lawsuits, changes in the market, or natural disasters through proper insurance coverage, competent legal and accounting advice, and by simply educating yourself.
Be conservative – There are tons of formulas to measure the value of a commercial real estate property, but they can be unreliable, especially if they’re based on overly optimistic rental rates, expenses or vacancy rates. A knowledgeable commercial real estate agent can help verify values so you know if you’re getting a good deal.
Learn from others – Failure is a great teacher. Most successful people say they learned more from their failures than their successes, so seek out those people and ask their advice. Build your success by learning from those around you who have made the mistakes and learned how to build upon them.
Get more great advice about commercial real estate investing from your ELP. All Dave’s ELPs are experts in their markets and can help you find the right property for your portfolio. Get in touch with your commercial real estate ELP today!