Today, we will debunk 5 of the most common myths to investing in commercial real estate.
Myth #1: You need a lot of money to invest in commercial real estate or you need excellent credit.
Lenders and investors are will still loan you money for commercial real estate investment if you can show that the income potential is worth it. In commercial real estate, the average return on investment is 6-12% because the income stream is relatively consistent. When creating your investment plan think long-term and the more detailed the plan, the better.
Myth #2: It’s a complicated, full-time job.
Most investors are hands-off when it comes to their properties. Now, if you buy raw land or plan on renovating, then your initial investment will be a bit higher due to the intensive labor needed. Outsourcing your management and maintenance needs to employees or agencies takes a lot of the stress off of your shoulders as well. Furthermore, you have the ability to invest as a limited partner in other people’s projects and be more of a passive investor.
Myth #3: It’s too risky.
Every investment comes with risks. Every person also has a different level of risk that they are comfortable with. Some investors prefer to use triple-net leases because then the tenant handles all property expenses, which lowers the risk for the investor. In terms of risk, real estate is just about the safest investment you can make as it consistently outperforms the stock market and is an actual tangible asset you can touch and feel.
Myth #4: Good deals are hard to find.
There are always good investment opportunities in commercial real estate, but consulting professionals who specialize in this area is the key to finding them. By working with a commercial investment broker or expert, it opens up your options. You also gain the knowledge of someone who is an expert in a field that changes rapidly.
Myth #5: If a property is for sale, then there must be something wrong with it.
Don’t psych yourself out of a great opportunity by overthinking. As always you should do your due diligence to research a property and seller to find out if it is the right fit for you. However, don’t assume that because a property looks too good that there is something wrong. Some investors want to reinvest in a bigger property to increase their earnings. Others may be selling to prepare for retirement.
Like any investment, you should do your homework when researching properties and funding. You should also consult the experts. It may be cheaper to do it yourself at the moment, but that could lead to costly mistakes in the future.
Do you know of any other myths that we didn’t mention or questions about commercial real estate? Let us know and feel free to comment below.
For questions related to investments in real estate, feel free to contact us!