What is Going On In Your Current Market Today? We all know the residential market is cyclical it goes up and goes down and right now is the best time to get involved and make some real money. Regardless where you live across the nation, when the residential market is at its all time low, commercial is red hot.
A lot of people are asking, "How is The Residential Crash hitting Commercial?" The mortgage meltdown affects certain aspects of commercial real estate but not all. Some properties are recession proof. So what types of commercial properties are recession proof and why?
Apartments: It’s natural to gravitate towards multi family apartments when you first start out in commercial real estate. It’s a concept everyone understands "houses in a box." When people loose their homes they need a place to live, the next place they go to is apartments.
Self-Storage: So what’s better than apartments with all that income from those tenants in one place? Self-storage. Think about it, it’s like having an apartment without the people, no toilets, no trash and no tenants to occupy the space just their stuff. When people loose their homes they transition into apartments and if you’ve ever lived in an apartment you know the closet space is limited and the storage space is even less.
Assisted Living facilities: The next recession proof property type is assisted living facilities. It’s nothing more than giving assistance for people in need and most common the elderly. We all know the baby boomers are right upon us and the demand for assisted living is and always will be here.
Senior Living Facilities: Are a lot like assisted living but much easier to manage. When people get older they either end up in assisted living as we just covered or they look to have a relaxed lifestyle and choose to occupy space in a senior living facility. This is a fifty-five plus senior living facility with active seniors who want the done for you lifestyle.
Mobile Home Parks: I call this one the least sexy of all the property types, mobile home parks. Most people envision mobile home parks to be in bad areas with management stealing from you. Well you don’t need to worry about them skipping out and not paying the rent you know where they live. When people loose there home in a recession and they cannot afford to move into an apartment or if they were in an apartment and can no longer afford it they will occupy a mobile home in a mobile home park. It costs much less than a home and less than an apartment and because of that reason alone it’s classified as a recession proof commercial property.
Why is Commercial Real Estate the all time wealth builder? The reason is simple. Cash flowing properties. There are four reasons to keep cash flowing properties and each one has its own separate benefit.
- Cash Out
- Cash Flow
Most investors purchase commercial properties for one main reason other than cash flow and its appreciation. Unlike residential property, commercial property goes up in value much quicker and when the rents increase the NOI (net operating income) goes up when the NOI goes up the value goes through the roof.
I never buy retail, I buy wholesale and investors who buy with good old conventional wisdom put down huge deposits and personally sign for loans "which I do not," they do understand the rule of property value increase which is the appreciation. They buy on appreciation because they understand commercial real estate is always stable not cyclical like residential.
The next is depreciation good old "Uncle Sam" will allow you to write off a portion of the property each year, this is a write off for wear and tear.
Cash out is the wealth builder that I’ve been talking about. When you fill vacancies on a commercial property and keep it at market occupancy for just 180 days this is called seasoning. Any lender will require you to season the properties income then you can do cash out refinance.
Here’s the wealth explosion, you can take out all the equity in the property and put it into "HNB" Hip National Bank. This means your pocket all the cash and you don’t pay taxes on that money until you sell the property and still you can do a 1031 tax deferred exchange and roll it into another asset without having to pay capital gains.
Terry Hale teaches the simple steps on how anyone can get started in commercial Real Estate with none of your own money, credit or previous experience. His techniques work for all commercial property types to make tens of thousands in monthly cash flow and quick cash profits in today’s current market conditions. Terry continues to actively invest in commercial Real Estate all over the nation with over a decade of hands on experience Terry has perfected a step-by-step system that works in today’s current market conditions. Terry Hale is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.