AAOA Blog

Two Reasons to Invest in Commercial Properties Now

Precision Funding Group is in the business of educating real estate investors. “Residential investments are not likely to appreciate in the current environment, in fact, they may well depreciate in the short term,” warns PFG’s Managing Partner Jeff arris. What was once warm and comfortable may no longer be a viable investment option. 

Someone who has a small rental investment needs to consider increasing their rental portfolio incrementally.  If you have 2-5 units, now is a good time to consider 5-10. If you are a first time investor, it’s clearly the right time to move into commercial investments. 

Why? 

 Two reasons:

• While residential growth rates are coming to a standstill, Jeff Harris explains, commercial investments continue to grow steadily at an average of 8-12% annually, and will likely continue on that path in all major cities. “This market is not as volatile.  It’s clearly a safer investment.“ 

• The residential slowdown, the sub-prime crisis and the increase in foreclosures have created an increased need for apartments as more and more homeowners are becoming tenants. “With all of the new regulation on residential lending, there are fewer loans available-people will have to remain renters for a longer period of time.”

 Filling a Void in the Commercial Market

Savvy investors switching from residential to commercial find there is a void in the lender landscape.  Banks not only want to sell loans and service them, they want depositors so they can cross-sell their other products – depositors with documented income and perfect credit.  

But not every solid investor can meet their criterion.  Precision fills that gap:

•  Precision Funding Group loans from $100,000 to $1.5 million to accommodate smaller commerical investments. 
• PFG’s typical customer is a first time investor; someone with no proven track record in apartment management. 
• PFG will consider less than perfect credit. 
• They specialize in working with someone with income that is difficult to document -  commissioned workers, the self-employed.  PFG may be able to work a loan without the need to document income, if the property is a good investment. 

Finding a Good Commercial Investment

To determine whether a property is a good commercial investment, Precision applies a tried-and-true formula that compares the net operating income and the capitalization rate for the property. Jeff Harris explains:

• “You basically need to take your income less your operating expenses, which are typically 35% of income, to arrive at your Net Operating Income. 
  
  
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  Divide that by the Capitalization Rate for the area where the property is located to achieve your score.  
  
  
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  A low capitalization rate and a low vacancy rate make for a good investment. We have customers who look at properties in cities that have good numbers.”

Precision Funding Group’s Promise to Investors

“Our desire is to get a customer into a property that makes sense for them.  We don’t try to force it.  If someone has a credit score of 700, and 30% down, they should shop the rates at banks.  We help people who want to get into the investment, but may not fit the bank’s profile. We fill a void in the market because we are more flexible. This is the perfect time to get into the market and enjoy the steady growth in commercial investing. 

Great Savings for AAOA Members!

Commercial loans carry greater costs because appraisals and title work are more in-depth. 

Precision Funding Group is currently offering AAOA Members $1,000 to use against closing costs. 

Be sure to mention that when you call!

Precision Funding Group 1-888-914-4734, ext. 2, or ask for Jeff Harris, Managing Partner, or email info@commercialprecision.com.

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