If you look at the current real estate scenario, then it stands true that the real estate industry has made more money as compared to any other industry.
In spite of this fact, potential investors are still skeptical to foray into this industry, but that hasn’t stopped the young people from making money with commercial real estate.
So how are they doing this? Following are the multiple successful scenarios that have worked:
Scenario 1: They invest in a partially occupied commercial building that houses low paying monthly tenants. Upon acquiring the property, they evict these tenants and make several cosmetic changes to the property. Once it looks aesthetically pleasing, they approach a known leasing team in the market and put their property up in the market, with higher markup rent, eventually selling the property at a profitable price.
Scenario 2: They invest in a facility that is a self-storage and has only half occupancy. They get rid of the old staff and hire new people. The property undergoes complete rebranding, with an online presence. Further, they fix the repairable things and raise the rents for the existing customers, which in the future goes onto sale at a higher price.
Scenario 3: The young successful people acquire a property that houses problematic tenants. They evict these tenants and make basic upgrades throughout the property. These upgrades are further used to lure better tenants and better investors. Once the cash flow improves, they go ahead with refinancing and withdraw almost all the invested capital in the property. Now, they don’t have money stuck in the property but still own a major asset there. This gives them the best of both the worlds—even more so as their equity proceeds will not be considered taxable.
Scenario 4: They invest in an old run-down industrial warehouse, which comes with built-in racking systems. They sign the deal at a nominal amount and once they own the property, they dismantle the internal racking system and sell the scrap at a good price. Also, they make money by selling the junk lying around in the warehouse. All the money earned by selling the scrap is invested back in the property to upgrade and lease or sell to a profitable client.
When it comes to commission, commercial properties are the best bet to earn a handsome amount. These scenarios may seem daunting, but they have worked. We are Private Capital Investors strongly believe that there are three ways to make great money with commercial real estate
#1 Investor
It is easier for successful investors to make a significant amount of money with real estate, which is possible only through creating a consistently good profile or looking for long-term ownership.
When investing, save enough money to give the down payment, for example, a ten-unit building. The income that you make from that property will help you save enough to make a down payment for the next property.
However, keeping enhancing every property you own to increase the net operating income. You can then use this property to refinance, using only a portion of the money to invest in another property.
This is one of the most ideal patterns to follow. Keep using the cash flow from your investments for buying more properties every couple of years until you have built the profile of your choice.
While doing this, always remember that every pro comes with con. The only downside to the investor pattern is regularly growing your profile will put your capital at risk, wherein you will take more than the required time to become a wealthy individual.
You will have to witness the constant market fluctuations—interest rate, maintenance, managing the tenants—and prepare to negotiate this. Therefore, hone your investor skills and before you dive headfirst, completely understand the ever-increasing need of the market.
#2 Developer
Becoming a property developer is by far the quickest way of making quick bucks in the market. For this exact reason, many aspiring people start working with the developer hoping that they would acquire enough knowledge to start a firm of their own.
But, not many people know that being a developer is probably the only job in this industry that has the highest risk associated. Right from the risking the amounts in their debt and equity from their capital income, developers face high risks.
While the niche focus of the primary aspirants continues with envisioning their own firm; it is important to strategize about economic downturns and building capital partnerships.
Yes, successful developers have payouts that can outweigh anyone working in the commercial real estate industry. However, many have to wait it out to witness success through risk and labor.
#3 Broker
If you meet a well-known commercial broker, you would know that they potentially earn approximately over USD 250,000 per annum within a couple of years of them entering the industry. This is possible only because as a broker you are always paid 100% of the commission.
Similar to developers and investors, in the beginning, you will hardly be making money. Realistically speaking every good broker needs a year to understand the business, the market, and vicinity, and make a strong database.
Working as a broker can be a tough job, and it will take time before you have projects shooting your way. The only beneficial factor as a broker is that unlike developers or investor you make more money without having to worry about capital investments. The only capital that you will be investing as a broker will be, effort and time.
Many believe that brokerage is like sales. Well, the brokerage does involve a part of sales, similar to many other professions. If you are constantly exchanging ideas and are open to work or collaborate with others, then you are in sales.
Sales is essentially about helping people make better decisions, and not convincing them to do something. Keeping this in perspective, the brokerage does involve sales, but being a good broker involves a lot more than this.
Good brokers form an integral part of their clients’ businesses. They give realistic suggestions when it comes to investments, monitoring expenses, and modifying the property.
Also, their business book is better than yellow pages when it comes to finding the best attorneys, lenders, appraisers, industry vendors, and inspectors.
While these scenarios may have given you a clear perspective about how young people are making money in the commercial real estate industry. We have further answered some of the commonly asked questions about making money in this industry:
- Can I
invest in the real estate market with no money? You can opt for one of the
following methods:
- Lease options (seller financing)
- Trade some of the fixed assets (car, valuable items)
- Take over the mortgage payment who comes from a severely distressed situation
- Opt for an investment partner
- Use the
lending network
- Real estate investment, how does it work? The concept is simple, cash flow. This means that your incoming income has to be greater than outgoing funds, commonly known as cash flow. When it comes to commercial rental properties, this is the most dependable method every investor should focus on.
- Real estate investment, is it good? A one hundred percent yes, not because we are Private Capital Investors, but because real estate has seen the maximum growth in our history.
While the scenarios, the profiles, and the commonly asked questions will be a good place to begin your journey as a young investor, it also largely depends on the strategy you implement. In the ever-competitive world of today, it is important to have a physical address, an address that is a part of the brand identity.
And, these physical assets are the winning points for the real estate industry. As you grow within the commercial real estate industry, you will find multiple ways to build your professional profile and invest in large scale properties. But for now, inspire yourself with these options and begin somewhere. If you see an opportunity, go for it. Find an investor or use your own money, do what fits the bill.
