Two Reasons to Invest in Commercial Property

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. 
  
  
• 
  
  Divide that by the Capitalization Rate for the area where the property is located to achieve your score.  
  
  
• 
  
  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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Filed under: AAOA Forum, Financing

This entry was posted on Wednesday, October 10th, 2007 at 5:50 pm and is filed under AAOA Forum, Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Real Estate Investment Secrets, Part Three of Twelve said at November 27th, 2007 at 11:18 am

   […] “Most investors will find the property they want, then approach the owner for the sale.  You’ll still pay market value, and probably still need to work with a broker, but it avoids ”a beauty contest” over a new listing, and may mean the difference between getting the property and losing it in a bidding war.”   Want to read more of Ron’s secrets? This exclusive interview is included on the American Apartment Owners Association’s CD series, Real Estate Investment Secrets, twelve exclusive interviews with industry experts that will supercharge your ability to locate the best investment properties and manage or sell them for maximum profit.  Real Estate Investment Secrets is available for purchase from American Apartment Owners Association. Join as a Premium Plus member, and receive all of the benefits of our association including Real Estate Investment Secrets as our gift for joining.  Visit www.joinaaoa.org for more information.  Check back for next week’s feature, “Tenant Screening: Little Known Secrets to Avoid Big Mistakes,”  with Jeff Cronrod, CEO of Fidelity Information Corporation. Missed Part One, “How to Buy, Reposition and Resell Income Properties for Maximum Profit” with Daron Campbell, Managing Partner, RE/MAX Commercial Real Estate?  Click here. Missed Part Two, “Finding the Right Real Estate Broker” with David Potarf, National Multi Housing Group: Marcus and Millichap? Click here. American Apartment Owners Association offers discounts on products and services related to your commercial housing investment, including tenant debt collection, tenant background checks, insurance and financing.  Find out more at www.joinaaoa.org. Sign up to receive our posts by submitting your email in the box provided in the upper right corner.  Interested in commercial financing.  See our blog feature Two Reasons to Invest in Commercial Properties with Jeff Mack.             Tags: evaluating+commercial+investment+property, undervalued+commercial+property, real+estate+market+research, commercial+real+estate, commercial+properties+Dallas, apartment+owners+association […]

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