The trend in commercial property investing has been to invest in residential properties and hope for a quick return by flipping them, but this can be a fairly risky and disappointing investment strategy. A smarter strategy might be to invest in Commercial Real Estate in Lake Of The Ozarks, MO for the long term positive cash flow. It’s probably more attainable than you think. Here are some reasons that it’s worth considering.
Leverage: Leverage, simply put, is the act of using borrowed capital and financial instruments to purchase an asset; you are leveraging somebody else’s capital to invest in a property. This allows you to participate in larger ventures. Combined with appreciation, the money making potential is significant. When the property increases in value, not only have you made a good return on your initial investment, you have an asset that is worth more than when you bought it. This is the mechanism behind the success of smart investors.
More Financing Options: Commercial loans are typically far more flexible than residential loans. You can purchase a commercial property with a relatively small down payment. Lenders look at a different set of data when determining your commercial loan eligibility. It’s not just about your credit score and your current cash flow; they’re looking at the property’s potential. Commercial real estate is a fairly safe investment, and lenders are most interested in whether or not the property will provide a reliable return. It’s also common to use a combination of financing options, such as owner financing in which the seller holds a second mortgage, or private investors.
Forced Appreciation: Commercial real estate isn’t valued the same way residential real estate is. The value of a home is based on comparable sales in the area, while commercial real estate’s value is based on how much revenue it produces. If a property makes more money, it’s worth more money. You can force appreciation by doing things that increase the revenue of your property and decrease your expenses. Examples of this include updating units so you can increase the rent and shopping around for a better deal on service contractors. You’ve increased your net operating income (NOI) and made your commercial property more valuable.
Combine these advantages with long lease terms, a regular income stream and less market competition, and commercial real estate starts to sound like a good idea. As always, do your research and invest wisely.
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